10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended December 28, 2012

Commission File Number  1-7635

TWIN DISC, INCORPORATED

(Exact name of registrant as specified in its charter)

Wisconsin	39-0667110
(State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization)	Identification No.)

1328 Racine Street, Racine, Wisconsin  53403

(Address of principal executive offices)

(262) 638-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes √                                No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes √ No__

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer                                                      Accelerated Filer√

Non-accelerated filer                                                                                     Smaller reporting company__

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes                                No  √

At January 25, 2013, the registrant had 11,243,484 shares of its common stock outstanding.

 Part I.                      FINANCIAL INFORMATION

Item 1.                      Financial Statements

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

	December 28,			June 30,
	2012			2012
Assets
Current assets:
Cash	$	20,570		$	15,701
Trade accounts receivable, net		38,465			63,438
Inventories, net		118,298			103,178
Deferred income taxes		4,555			3,745
Other		11,200			11,099
Total current assets		193,088			197,161
Property, plant and equipment, net		65,737			66,356
Goodwill, net		13,267			13,116
Deferred income taxes		13,109			14,335
Intangible assets, net		4,794			4,996
Other assets		9,581			7,868
Total assets	$	299,576		$	303,832
Liabilities and Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	3,697		$	3,744
Accounts payable		24,367			23,550
Accrued liabilities		32,736			39,331
Total current liabilities		60,800			66,625
Long-term debt		30,297			28,401
Accrued retirement benefits		60,223			64,009
Deferred income taxes		3,816			3,340
Other long-term liabilities		3,291			4,948
Total liabilities		158,427			167,323
Equity
Twin Disc shareholders’ equity:
Common shares authorized: 30,000,000;
issued: 13,099,468; no par value		11,901			12,759
Retained earnings		186,842			184,306
Accumulated other comprehensive loss		(30,143	)		(34,797	)
		168,600			162,268
Less treasury stock, at cost (1,855,984 and 1,794,981 shares, respectively)		28,423			26,781
Total Twin Disc shareholders' equity		140,177			135,487
Noncontrolling interest		972			1,022
Total equity		141,149			136,509
Total liabilities and equity	$	299,576		$	303,832

The notes to condensed consolidated financial statements are an integral part of these statements.

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands, Except Per Share Data)

(Unaudited)

	Three Months Ended						Six Months Ended
	Dec. 28,			Dec. 30,			Dec. 28,			Dec. 30,
	2012			2011			2012			2011
Net sales	$	72,325		$	82,941		$	141,118		$	164,271
Cost of goods sold		50,014			53,379			99,391			103,941
Gross profit		22,311			29,562			41,727			60,330
Marketing, engineering and administrative expenses		16,770			20,097			33,390			36,006
Earnings from operations		5,541			9,465			8,337			24,324
Interest expense		329			381			635			740
Other (income) expense, net		(22	)		(150	)		105			(544	)
		307			231			740			196
Earnings before income taxes and noncontrolling interest		5,234			9,234			7,597			24,128
Income taxes		1,815			3,385			2,912			8,569
Net earnings		3,419			5,849			4,685			15,559
Less: Net earnings attributable to noncontrolling interest, net of tax		(59	)		(9	)		(94	)		(63	)
Net earnings attributable to Twin Disc	$	3,360		$	5,840		$	4,591		$	15,496
Dividends per share	$	0.09		$	0.08		$	0.18		$	0.16
Earnings per share data:
Basic earnings per share attributable to Twin Disc common shareholders	$	0.30		$	0.51		$	0.41		$	1.36
Diluted earnings per share attributable to Twin Disc common shareholders	$	0.29		$	0.50		$	0.40		$	1.34
Weighted average shares outstanding data:
Basic shares outstanding		11,366			11,429			11,368			11,411
Dilutive stock awards		68			143			73			144
Diluted shares outstanding		11,434			11,572			11,441			11,555
Net earnings	$	3,419		$	5,849		$	4,685		$	15,559
Other comprehensive income (loss), net:
Benefit plan adjustments, net of income taxes of $375, $236, $759 and $507,respectively	$	652			411		$	1,320			885
Foreign currency translation adjustment		2,130			(6,258	)		3,394			(8,533	)
Other comprehensive income (loss), net		2,782			(5,847	)		4,714			(7,648	)
Comprehensive income		6,201			2			9,399			7,911
Less: comprehensive income attributable to noncontrolling interest		(59	)		(9	)		(94	)		(63	)
Comprehensive income (loss) attributable to Twin Disc	$	6,142		$	(7	)	$	9,305		$	7,848

The notes to condensed consolidated financial statements are an integral part of these statements.

TWIN DISC, INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Six Months Ended
	December 28,			December 30,
	2012			2011
Cash flows from operating activities:
Net earnings	$	4,685		$	15,559
Adjustments to reconcile net earnings to net cash
(used) provided by operating activities:
Depreciation and amortization		5,345			5,311
Other non-cash changes, net		1,599			3,756
Net change in working capital, excluding cash		463			(28,215	)
Net cash provided (used) by operating activities		12,092			(3,589	)
Cash flows from investing activities:
Acquisitions of fixed assets		(3,529	)		(6,893	)
Proceeds from sale of fixed assets		35			72
Other, net		(293	)		(293	)
Net cash used by investing activities		(3,787	)		(7,114	)
Cash flows from financing activities:
Proceeds from notes payable		42			-
Payments of notes payable		(93	)		(52	)
Proceeds from long-term debt, net		1,892			12,122
Proceeds from exercise of stock options		189			169
Dividends paid to shareholders		(2,055	)		(1,828	)
Dividends paid to noncontrolling interest		(204	)		(130	)
Acquisition of treasury stock		(3,069	)		-
Excess tax benefits from stock compensation		1,276			535
Other		(1,700	)		(185	)
Net cash (used) provided by financing activities		(3,722	)		10,631
Effect of exchange rate changes on cash		286			(1,474	)
Net change in cash		4,869			(1,546	)
Cash:
Beginning of period		15,701			20,167
End of period	$	20,570		$	18,621

The notes to condensed consolidated financial statements are an integral part of these statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include all adjustments, consisting only of normal recurring items, necessary for a fair presentation of results for each period.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations.  The Company believes that the disclosures made are adequate to make the information presented not misleading.  It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest Annual Report.  The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Revision of Prior Period Financial Statements

During the second quarter of fiscal 2013, the Company identified errors related to its reserve for uncertain tax positions that affected prior periods beginning in the year ended June 30, 2007 and subsequent periods through September 28, 2012.   In evaluating whether the Company's previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standard Codification ("ASC") Topic 250, Accounting Changes and Error Corrections and ASC Topic 250-10-S99-1, Assessing Materiality.  The Company concluded this error was not material individually or in the aggregate to any of the prior reporting periods.  However, the cumulative error would be material in the year ended June 30, 2013, if the entire correction was recorded in the second quarter of fiscal 2013.  As such, the revision for this correction to the applicable prior periods is reflected in the financial information herein and will be reflected in future filings containing such financial information.  As a result of correcting the errors related to its reserve for uncertain tax positions, net earnings attributable to Twin Disc was decreased by $69,000, $50,000 and $104,000 in 2012, 2011 and 2010, respectively.  The cumulative impact of this error correction prior to fiscal 2011 was to reduce shareholders’ equity at June 30, 2010 by $658,000.  In addition to recording this correcting adjustment, the Company recorded other adjustments to prior period amounts to correct other immaterial out-of-period adjustments related to income taxes, including those that had been previously disclosed.  As a result of correcting these other immaterial out-of-period adjustments, net earnings attributable to Twin Disc was increased by $700,000 in 2012, decreased by $783,000 in 2011, and increased by $83,000 in 2010.  The cumulative impact of these other immaterial out-of-period adjustments prior to fiscal 2011 was to increase shareholders’ equity at June 30, 2010 by $83,000.

In addition, in the third quarter of fiscal 2012, the Company identified a prior period error in their first and second quarter 2012 condensed consolidated financial statements related to the cash flow statement classification of the excess tax benefit related to stock-based compensation.  The excess tax benefit in the first and second quarter of fiscal 2012, in the amount of $445,000 and $90,000, respectively, was reflected in operating activities rather than financing activities in the condensed consolidated cash flow statement.  There was no impact of the error on the condensed consolidated statement of comprehensive income or condensed consolidated balance sheet.  The Company concluded this error was not material individually or in the aggregate to any of the prior periods.  The revision for the correction is reflected in the financial information herein and will be reflected in future filings containing affected financial information.

The impacts of these revisions are shown in the following tables (in ‘000’s):

	As of and for the period ended June 30, 2011				As of and for the period ended September 30, 2011
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	41,673	700	42,373		38,301	608	38,909
Total current liabilities	83,960	700	84,660		77,165	608	77,773
Other long term liabilities	7,089	708	7,797		4,363	725	5,088
Total liabilities	171,066	1,408	172,474		170,619	1,333	171,952
Retained earnings	162,857	(1,408)	161,449		171,524	(1,333)	170,191
Total equity	138,054	(1,408)	136,646		145,811	(1,333)	144,478
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	13,064	833	13,897		5,259	(75)	5,184
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net earnings attributable to Twin Disc	18,830	(833)	17,997		9,581	75	9,656
Basic earnings per share	1.66	(0.07)	1.59		0.84	0.01	0.85
Diluted earnings per share	1.64	(0.07)	1.57		0.83	0.01	0.84
Comprehensive income (loss)	49,743	(833)	48,910		7,834	75	7,909
Comprehensive income (loss) attributable to Twin Disc	49,608	(833)	48,775		7,780	75	7,855
Revised consolidated statement of cash flows amounts
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net change in working capital, excluding cash and debt, and other					(16,354)	(75)	(16,429)
Accrued liabilities	6,713	833	7,546
Other non-cash changes, net					2,950	(445)	2,505
Net cash used by operating activities					(1,196)	(445)	(1,641)
Excess tax benefits from stock comp					-	445	445
Net cash provided by financing activities					10,051	445	10,496
	As of and for the period ended December 30, 2011				As of and for the period ended March 30, 2012
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	38,056	608	38,664
Total current liabilities	77,872	608	78,480
Other long term liabilities	4,845	742	5,587		4,478	759	5,237
Total liabilities	170,822	1,350	172,172		168,130	759	168,889
Retained earnings	176,467	(1,350)	175,117		184,831	(759)	184,072
Total equity	145,586	(1,350)	144,236		157,231	(759)	156,472
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	8,627	(58)		8,569	14,039	(649)	13,390
Net earnings	15,501	58		15,559	24,939	649	25,588
Net earnings attributable to Twin Disc	15,438	58		15,496	24,831	649	25,480
Basic earnings per share	1.35	0.01		1.36	2.18	0.05	2.23
Diluted earnings per share	1.34	-		1.34	2.15	0.05	2.20
Comprehensive income (loss)	7,853	58		7,911	19,950	649	20,599
Comprehensive income (loss) attributable to Twin Disc	7,790	58		7,848	19,842	649	20,491
Quarter
Income taxes	3,368	17		3,385	5,412	(591)	4,821
Net earnings	5,866	(17)		5,849	9,438	591	10,029
Near earnings attributable to Twin Disc	5,857	(17)		5,840	9,393	591	9,984
Basic earnings per share	0.51	-		0.51	0.82	0.05	0.87
Diluted earnings per share	0.51	(0.01)		0.50	0.81	0.05	0.86
Comprehensive income (loss)	19	(17)		2	12,097	591	12,688
Comprehensive income (loss) attributable to Twin Disc	10	(17)		(7)	12,052	591	12,643
Revised consolidated statement of cash flows amounts
Net earnings	15,501	58		15,559	24,939	649	25,588
Net change in working capital, excluding cash and debt, and other	(28,157)	(58)		(28,215)	(41,315)	(649)	(41,964)
Accrued liabilities
Other non-cash changes, net	4,291	(535)		3,756
Net cash used by operating activities	(3,054)	(535)		(3,589)
Excess tax benefits from stock comp	-	535		535
Net cash provided by financing activities	10,096	535		10,631
	As of and for the period ended June 30, 2012				As of and for the period ended September 28, 2012
	Reported	Adjustment		Revised	Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Other long term liabilities	4,171	777		4,948	2,200	797	2,997
Total liabilities	166,546	777		167,323	160,512	797	161,309
Retained earnings	185,083	(777)		184,306	185,308	(797)	184,511
Total equity	137,286	(777)		136,509	139,587	(797)	138,790
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	18,446	(631)		17,815	1,077	20	1,097
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net earnings attributable to Twin Disc	26,112	631		26,743	1,251	(20)	1,231
Basic earnings per share	2.29	0.05		2.34	0.11	-	0.11
Diluted earnings per share	2.26	0.05		2.31	0.11	-	0.11
Comprehensive income (loss)	2,882	631		3,513	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	2,684	631		3,315	3,183	20	3,203
Quarter
Income taxes	4,407	18		4,425	1,077	20	1,097
Net earnings	1,371	(18)		1,353	1,286	(20)	1,266
Net earnings attributable to Twin Disc	1,281	(18)		1,263	1,251	(20)	1,231
Basic earnings per share	0.11	-		0.11	0.11	-	0.11
Diluted earnings per share	0.11	-		0.11	0.11	-	0.11
Comprehensive income (loss)	(17,068)	(18)		(17,086)	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	(17,158)	(18)		(17,176)	3,183	20	3,203
Revised consolidated statement of cash flows amounts
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net change in working capital, excluding cash and debt, and other					(4,059)	20	(4,039)
Accrued liabilities	(2,273)	(631)		(2,904)

New Accounting Releases

In July 2012, the Financial Accounting Standards Board (“FASB”) issued amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment.  After an assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test.  Otherwise, the quantitative test is optional.  The amended guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial results.

In September 2011, the FASB issued a standards update that is intended to simplify how entities test goodwill for impairment.  This update permits an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350 “Intangibles-Goodwill and Other.”  This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (the Company’s fiscal 2013).  This standards update is not expected to have a material impact on the Company’s financial statements.

B. Inventory

The major classes of inventories were as follows (in thousands):

	December 28,	June 30,
	2012	2012
Inventories:
Finished parts	$78,710	$62,909
Work in process	13,983	16,608
Raw materials	25,605	23,661
	$118,298	$103,178

C. Warranty

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers.  However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation.  The warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date.  When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends.  While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires.  The following is a listing of the activity in the warranty reserve during the three and six month periods ended December 28, 2012 and December 30, 2011 (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Reserve balance, beginning of period	$5,462	$6,583	$5,745	$6,022
Current period expense	1,086	317	1,967	1,781
Payments or credits to customers	(1,066)	(906)	(2,251)	(1,679)
Foreign currency translation	51	(111)	72	(241)
Reserve balance, end of period	$5,533	$5,883	$5,533	$5,883

The current portion of the warranty accrual ($3,812,000) is reflected in accrued liabilities, while the long-term portion ($1,721,000) is included in other long-term liabilities on the Consolidated Balance Sheets.

D. Contingencies

The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, is not presently determinable.  Management believes that final disposition of such litigation will not have a material impact on the Company’s results of operations, financial position or cash flows.

E. Business Segments

The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy duty off-highway power transmission equipment.  Principal products include marine transmissions, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems.  The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets.

The Company has two reportable segments: manufacturing and distribution. These segments are managed separately because each provides different services and requires different technology and marketing strategies. The accounting practices of the segments are the same as those described in the summary of significant accounting policies. Transfers among segments are at established inter-company selling prices.  Management evaluates the performance of its segments based on net earnings.

Information about the Company’s segments is summarized as follows (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Manufacturing segment sales	$66,914	$78,044	$125,196	$149,027
Distribution segment sales	33,742	29,082	64,745	63,177
Inter/Intra segment elimination - manufacturing	(23,522)	(22,280)	(39,080)	(41,949)
Inter/Intra segment elimination - distribution	(4,809)	(1,905)	(9,743)	(5,984)
Net sales	$72,325	$82,941	$141,118	$164,271
Manufacturing segment net earnings	$5,055	$8,259	$7,889	$16,978
Distribution segment net earnings	1,551	1,065	2,703	3,230
Corporate and eliminations	(3,246)	(3,484)	(6,001)	(4,712)
Net earnings attributable to Twin Disc	$3,360	$5,840	$4,591	$15,496
	Dec. 28,	June 30,
Assets	2012	2012
Manufacturing segment assets	$282,930	$272,098
Distribution segment assets	62,981	58,275
Corporate assets and elimination
of inter-company assets	(46,335)	(26,541)
	$299,576	$303,832

F. Stock-Based Compensation

In the first half of fiscal 2013 and 2012, the Company granted a target number of 28,255 and 15,449 performance stock unit awards, respectively, to various employees of the Company, including executive officers.  The performance stock unit awards granted in fiscal 2013 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Unit Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2015.  The performance stock unit awards granted in fiscal 2013 are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance stock units that can be awarded if the target objective is exceeded is 33,906.  Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock unit awards granted in fiscal 2013 and has reversed previously recognized expenses related to these awards. The performance stock unit awards granted in fiscal 2012 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Unit Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2014.  The performance stock unit awards granted in fiscal 2012 are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance stock units that can be awarded if the target objective is exceeded is 18,539.  Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock unit awards granted in fiscal 2012 and has reversed previously recognized expenses related to these awards. There were 161,734 and 243,647 unvested stock unit awards outstanding at December 28, 2012 and December 30, 2011, respectively.  The performance stock unit awards are remeasured at fair-value based upon the Company’s stock price at the end of each reporting period.  The fair-value of the stock unit awards are expensed over the performance period for the shares that are expected to ultimately vest.  The compensation (income) expense for the three and six months ended December 28, 2012, related to the performance stock unit awards, approximated $(58,000) and $120,000 respectively. The compensation expense for the three and six months ended December 30, 2011, related to the performance stock unit awards, approximated $2,016,000 and $1,051,000 respectively.

In the first half of fiscal 2013 and 2012, the Company granted a target number of 28,535 and 15,335 performance stock awards, respectively, to various employees of the Company, including executive officers.  The performance stock awards granted in fiscal 2013 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2015.  The performance stock awards granted in fiscal 2013 are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 34,242.  Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock awards granted in fiscal 2013 and has reversed previously recognized expenses related to these awards.  The performance stock awards granted in fiscal 2012 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2014.  The performance stock awards granted in fiscal 2012 are subject to adjustment if the Company’s economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 18,402.  Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock awards granted in fiscal 2012 and has reversed previously recognized expenses related to these awards. There were 130,926 and 191,398 unvested stock awards outstanding at December 28, 2012 and December 30, 2011, respectively.  The fair value of the stock awards (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest.  The compensation (income) expense for the three and six months ended December 28, 2012, related to performance stock awards, approximated $(164,000) and $15,000, respectively.  The compensation expense for the three and six months ended December 30, 2011, related to performance stock awards, approximated $214,000 and $411,000, respectively.

In addition to the performance shares mentioned above, the Company has unvested restricted stock outstanding that will vest if certain service conditions are fulfilled.  The fair value of the restricted stock grants is recorded as compensation over the vesting period, which is generally 1 to 4 years.  During the first half of fiscal 2013 and 2012, the Company granted 83,729 and 43,620 service-based restricted shares, respectively, to employees and non-employee directors.  There were 220,343 and 250,323 unvested shares outstanding at December 28, 2012 and December 30, 2011, respectively.  The compensation expense for the three and six months ended December 28, 2012, related to these service-based awards approximated $400,000 and $788,000, respectively. The compensation expense for the three and six months ended December 30, 2011, related to these service-based awards approximated $364,000 and $706,000, respectively.

G. Pension and Other Postretirement Benefit Plans

The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to October 1, 2003 and certain foreign employees.  Additionally, the Company provides health care and life insurance benefits for certain domestic retirees.  Components of net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Pension Benefits:
Service cost	$49	$53	$93	$99
Interest cost	1,311	1,517	2,619	3,027
Expected return on plan assets	(1,580)	(1,928)	(3,151)	(3,847)
Amortization of net loss	835	580	1,669	1,160
Net periodic benefit cost	$615	$222	$1,230	$439
Postretirement Benefits:
Service cost	$9	$10	$17	$21
Interest cost	191	247	383	493
Amortization of net actuarial loss	197	105	395	210
Net periodic benefit cost	$397	$362	$795	$724

The Company expects to contribute approximately $4,352,000 to its pension plans in fiscal 2013.  As of December 28, 2012, $3,562,000 in contributions have been made.

H. Income Taxes

For the six months ended December 28, 2012 and December 30, 2011, the Company’s effective income tax rate was 38.3% and 35.5% respectively.  The fiscal 2013 rate reflects the impact of the valuation allowance on a continued reduced earnings base, increased net foreign earnings and additional reserves for uncertain tax positions ($380,000).  Decreased domestic sales were offset by a limited Section 199 deduction.  No research and development tax credit was reflected as it was not extended within the quarter.  The favorable impact of the recently extended research and development tax credit will be recorded in the third fiscal quarter, as it was signed January 2, 2013.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate.  Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.  The impact of the Company’s operations in certain foreign jurisdictions is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

The Company has approximately $1,500,000 of unrecognized tax benefits, including related interest and penalties, after the revision discussed in footnote A as of December 28, 2012, which, if recognized, would favorably impact the effective tax rate.  The Company finalized an audit settlement in the U.S. for fiscal years 2010 and 2011 which resulted in a decrease in unrecognized tax benefits of $305,000.  Additionally, as a result of an on-going state audit, the Company added an additional reserve of $380,000.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States.  In general, the tax years that remain subject to examination are 2008 through 2011 for the major operations in Italy, Belgium, and Japan.  The tax years open to examination in the U.S. are for years subsequent to fiscal 2011.  The state of Wisconsin income tax audit remains ongoing for the fiscal years 2001 through 2009.  During this quarter the Company was notified by the state of Florida of a tax examination covering open periods.  It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2013.

I. Goodwill and Other Intangibles

The changes in the carrying amount of goodwill, all of which is allocated to the manufacturing segment, for the six months ended December 28, 2012 were as follows (in thousands):

Gross balance at June 30, 2012	$16,786
Accumulated impairment losses	(3,670)
Net balance at June 30, 2012	$13,116
Gross balance at June 30, 2012	$16,786
Translation adjustment	151
Gross balance at December 28, 2012	16,937
Accumulated impairment losses	(3,670)
Net balance at December 28, 2012	$13,267

The gross carrying amount and accumulated amortization of the Company’s intangible assets that have defined useful lives and are subject to amortization as of December 28, 2012 and June 30, 2012 were as follows (in thousands):

	December 28,	June 30,
	2012	2012
Intangible assets with finite lives:
Licensing agreements	$3,015	$3,015
Non-compete agreements	2,050	2,050
Other	5,991	5,991
	11,056	11,056
Accumulated amortization	(8,937)	(8,583)
Foreign currency translation	545	469
Total	$2,664	$2,942

The weighted average remaining useful life of the intangible assets included in the table above is approximately 6 years.

Intangible amortization expense was $166,000 and $354,000 for the three and six months ended December 28, 2012, respectively, and $201,000 and $417,000 for the three and six months ended December 30, 2011, respectively. Estimated intangible amortization expense for the remainder of fiscal 2013 and each of the next five fiscal years is as follows (in thousands):

Fiscal Year
2013	$376
2014	722
2015	420
2016	280
2017	276
2018	276

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are not subject to amortization as of December 28, 2012 and June 30, 2012 are $2,130,000 and $2,054,000, respectively.  These assets are comprised of acquired tradenames.

J.   Long-term Debt

Long-term debt at December 28, 2012 and June 30, 2012 consisted of the following (in thousands):

	December 28,	June 30,
	2012	2012
Revolving loan	$19,500	$17,550
10-year unsecured senior notes	14,286	14,286
Other	208	309
Subtotal	33,994	32,145
Less: current maturities and short-term borrowings	(3,697)	(3,744)
Total long-term debt	$30,297	$28,401

The revolving loan and unsecured senior notes listed above are subject to certain covenants, including restrictions on investments, acquisitions and indebtedness.  Financial covenants, as defined, include a minimum consolidated net worth, a minimum EBITDA for the most recent four fiscal quarters, and a maximum total funded debt to EBITDA ratio.  As of December 28, 2012, the Company was in compliance with these covenants.

The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities.  This rate was represented by the US Treasury Three-Year Yield Curve Rate (0.36% and 0.41% for December 28, 2012 and June 30, 2012, respectively), plus the current add-on related to the revolving loan agreement (1.50% for December 28, 2012 and June 30, 2012).  The fair value of the Company’s 10-year unsecured senior notes due April 10, 2016 was approximately $15,499,000 and $15,768,000 at December 28, 2012 and June 30, 2012, respectively.  The Company’s revolving loan agreement approximates fair value at December 28, 2012 and June 30, 2012.  If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.

K.   Shareholders’ Equity

On February 1, 2008, the Board of Directors authorized the purchase of 500,000 shares of Common Stock at market values.  On July 27, 2012, the Board of Directors authorized the purchase of an additional 375,000 shares of Common Stock at market values.  These authorizations have no expiration.  The Company purchased 125,000 shares of its outstanding Common Stock in the fourth quarter of fiscal 2012 and 185,000 shares in the first six months of fiscal 2013.

The following is a reconciliation of the Company’s equity balances for the first fiscal six months of 2012 and 2013 (in thousands):
	Twin Disc, Inc. Shareholders’ Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance –June 30, 2011	$10,863	$161,449	($11,383)	($25,252)	$969	$136,646
Net income		15,496			63	15,559
Translation adjustments			(8,590)		57	(8,533)
Benefit plan adjustments, net of tax			885			885
Cash dividends		(1,828)			(130)	(1,958)
Compensation expense and
windfall tax benefits	1,653					1,653
Shares (acquired) issued, net	(912)			896		(16)
Balance-December 30, 2011	$11,604	$175,117	($19,088)	($24,356)	$959	$144,236
	Twin Disc, Inc. Shareholders’ Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance-June 30, 2012	$12,759	$184,306	($34,797)	($26,781)	$1,022	$136,509
Net income		4,591			94	4,685
Translation adjustments			3,334		60	3,394
Benefit plan adjustments, net of tax			1,320			1,320
Cash dividends		(2,055)			(204)	(2,259)
Compensation expense and
windfall tax benefits	2,079					2,079
Shares (acquired) issued, net	(2,937)			(1,642)		(4,579)
Balance-December 28, 2012	$11,901	$186,842	($30,143)	($28,423)	$972	$141,149

Item 2.                      Management Discussion and Analysis

In the financial review that follows, we discuss our results of operations, financial condition and certain other information.  The figures discussed in this review reflect the revision described in Note A.  This discussion should be read in conjunction with our consolidated fiscal 2012 financial statements and related notes.

Some of the statements in this Quarterly Report on Form 10-Q are “forward looking statements” as defined in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include the Company’s description of plans and objectives for future operations and assumptions behind those plans.  The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar anticipatory expressions, usually identify forward-looking statements. In addition, goals established by Twin Disc, Incorporated should not be viewed as guarantees or promises of future performance.  There can be no assurance the Company will be successful in achieving its goals.

In addition to the assumptions and information referred to specifically in the forward-looking statements, other factors, including but not limited to those factors discussed under Item 1A, Risk Factors, of the Company’s Annual Report filed on Form 10-K for June 30, 2012 could cause actual results to be materially different from what is presented here.

Results of Operations

(In thousands)
	Three Months Ended				Six Months Ended
	December 28,		December 30,		December 28,		December 30,
	2012	%	2011	%	2012	%	2011	%
Net sales	$72,325		$82,941		$141,118		$164,271
Cost of goods sold	50,014		53,379		99,391		103,941
Gross profit	22,311	30.8%	29,562	35.6%	41,727	29.6%	60,330	36.7%
Marketing, engineering and
administrative expenses	16,770	23.2	20,097	24.2	33,390	23.7	36,006	21.9
Earnings from operations	$5,541	7.7	$9,465	11.4	$8,337	5.9	$24,324	14.8

Comparison of the Second Quarter of FY 2013 with the Second Quarter of FY 2012

Net sales for the second quarter decreased 12.8%, or $10.6 million, to $72.3 million from the record $82.9 million in the same period a year ago.  Compared to the second quarter of fiscal 2012, on average, the euro and Asian currencies weakened against the U.S. dollar.  The net translation effect of this on foreign operations was to decrease revenues by approximately $0.7 million versus the prior year, before eliminations.  The decrease in sales was primarily the result of lower demand from customers in the pressure pumping sector of the North American oil and gas market.  Offsetting weakness in this market was higher demand from customers in the North American and Asian commercial marine markets.  Sales to customers serving the global mega yacht market remained at historical lows in the quarter, while demand remained steady for equipment used in the airport rescue and fire fighting (ARFF), and military markets.

Sales at our manufacturing segment were down 14.3% versus the same period last year.  Compared to the second quarter of fiscal 2012, on average, the euro weakened against the U.S. dollar.  The net translation effect of this on foreign manufacturing operations was to decrease revenues for the manufacturing segment by approximately $0.7 million versus the prior year, before eliminations.  In the current fiscal year’s second quarter, our domestic manufacturing operation saw a decrease in sales of 14.5% versus the second fiscal quarter of 2012.  The primary driver for this decrease was the decrease in shipments of transmissions and related products for the North American oil and gas markets.  This was only partially offset by an increase in commercial marine transmission shipments.  The Company’s Italian manufacturing operations, which have been adversely impacted by the softness in the European mega yacht and industrial markets, experienced a 16.7% decrease in sales compared to the prior fiscal year’s second quarter.  Nearly a third of this decrease relates to foreign currency translation.  The Company’s Belgian manufacturing operation, which also continues to be adversely impacted by the softness in the global mega yacht market, saw a 14.4% decrease in sales versus the prior fiscal year’s second quarter.  A little more than half of the decrease was driven by foreign exchange translation, as the Euro weakened against the U.S. Dollar compared to the second quarter of fiscal 2012.  The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced flat sales.

Our distribution segment experienced an increase of 16.0% in sales compared to the second quarter of fiscal 2012.  Compared to the second quarter of fiscal 2012, on average, the Asian currencies strengthened against the U.S. dollar.  The net translation effect of this on foreign distribution operations was to increase revenues for the distribution segment by approximately $0.8 million versus the prior year, before eliminations.  The Company’s distribution operation in Singapore continues to experience record demand for marine transmission products for use in various commercial applications.  This operation saw a nearly 50% increase in shipments versus the prior fiscal year’s record second quarter.  The Company’s distribution operation in the Northwest of the United States and Southwest of Canada experienced a decrease in sales of just over 40% versus the prior fiscal year’s record second quarter.  This operation continued to be impacted by the softness in the Canadian oil and gas market.  The Company’s distribution operation in Italy, which provides boat accessories and propulsion systems for the pleasure craft market, saw a 5% decrease in sales due to continued weakness in the global mega yacht market as well as customer requests to delay shipments.  The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw an increase in sales of 7%.

The elimination for net inter/intra segment sales increased $4.1 million, including an unfavorable exchange movement of $0.8 million, accounting for the remainder of the net change in sales versus the same period last year.

Gross profit as a percentage of sales decreased 480 basis points to 30.8% of sales, compared to 35.6% of sales for the same period last year.  Gross profit for fiscal 2013’s second quarter was significantly impacted by lower sales volumes, primarily due to lower shipments to the Company’s North American pressure pumping transmission customers (approximately $5.4 million), a less profitable mix related to the Company’s oil and gas transmission business (approximately $1.2 million), and unfavorable manufacturing efficiency and absorption due to lower volumes.

For the fiscal 2013 second quarter, marketing, engineering and administrative (ME&A) expenses, as a percentage of sales, were 23.2 %, compared to 24.2 % for the fiscal 2012 second quarter.  ME&A expenses decreased $3.3 million versus the same period last fiscal year.  Stock-based compensation expense decreased $2.4 million versus the prior year’s second fiscal quarter.  In addition, the annual bonus expense decreased approximately $1 million versus the prior year’s second fiscal quarter.

Interest expense of $0.3 million for the quarter was down 13.6% versus last year’s second fiscal quarter.  Total interest on the Company’s $40 million revolving credit facility (“revolver”) increased 9% to $0.1 million in fiscal 2013’s second quarter.  This increase can be attributed to an overall increase in the average borrowings year-over-year, partially offset by a lower interest rate on the revolver.  The average borrowing on the revolver, computed monthly, increased to $22.5 million in fiscal 2013’s second quarter, compared to $22.0 million in the same period a year ago.  The interest rate on the revolver decreased from a range of 1.74% to 2.12% in the prior fiscal year’s second quarter to a range of 1.71% to 1.73% in the current year.  The interest expense on the Company’s $25 million Senior Note decreased 20%, at a fixed rate of 6.05%, to $0.2 million, due to a lower remaining principal balance.

Other income of $0.0 million for the quarter ended December 28, 2012 decreased from other income of $0.2 million for the comparable period a year ago.  The prior year’s improvement was due primarily to favorable foreign currency movements of the Euro, Canadian Dollar and Swiss Franc.

The effective tax rate for the first half of fiscal 2013 is 38.3 percent, which is slightly higher than the prior year rate of 35.5 percent.  The current year rate is somewhat inflated due to the non-deductibility of the losses in certain foreign jurisdictions during the first half, due to an ongoing valuation allowance determination, on an overall reduced earnings base.  The favorable impact of the recently extended research and development tax credit will be recorded in the third fiscal quarter, as it was signed January 2, 2013.  The Company estimates the favorable impact of this item to be approximately $0.5 million.

Comparison of the First Six Months of FY 2013 with the First Six Months of FY 2012

Net sales for the first six months of fiscal 2013 decreased 14.1%, or $23.2 million, to $141.1 million from a record $164.3 million in the same period a year ago.  Compared to the first six months of fiscal 2012, on average, the euro and Swiss franc weakened against the U.S. dollar.  The net translation effect of this on foreign operations was to decrease revenues by approximately $2.8 million versus the prior year, before eliminations.  The decrease in sales continued to primarily be driven by lower demand from customers in the pressure pumping sector of the North American oil and gas market.  Offsetting weakness in this market was higher demand from customers in the North American and Asian commercial marine markets.  Sales to customers serving the global mega yacht market remained at historical lows in the first half, while demand remained steady for equipment used in the airport rescue and fire fighting (ARFF), and military markets.

Sales at our manufacturing segment were down 16.0% versus the same period last year.  Compared to the first six months of fiscal 2012, on average, the euro and Swiss franc weakened against the U.S. dollar.  The net translation effect of this on foreign manufacturing operations was to decrease revenues for the manufacturing segment by approximately $2.7 million versus the prior year, before eliminations.  In the current fiscal year’s first six months, our domestic manufacturing operation saw a decrease of nearly 19% in sales versus the first six months of fiscal 2012.  The primary driver for this decrease was the decrease in shipments of transmissions and related products for the North American oil and gas markets.  This was only partially offset by an increase in commercial marine transmission shipments.  The Company’s Italian manufacturing operations, which have been adversely impacted by the softness in the European mega yacht and industrial markets, experienced a 24.1% decrease compared to the prior fiscal year’s first six months.  Approximately one-third of this decrease can be attributed to unfavorable foreign currency translation, with the majority of the remaining decrease due to continued softness and timing of shipments to the Italian mega yacht market.  The Company’s Belgian manufacturing operation, which also continued to be adversely impacted by the softness in the global mega yacht market, saw a nearly 2% increase in sales versus the prior fiscal year’s first six months.  Adjusted for unfavorable foreign currency translation, the increase would have been closer to 6.5%.  The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a 13.5% decrease in sales.

Our distribution segment experienced a slight increase of 2.5% in sales compared to the first six months of fiscal 2012.  Compared to the first six months of fiscal 2012, on average, the Asian currencies strengthened again the U.S. dollar.  The net translation effect of this on foreign distribution operations was to increase revenues for the distribution segment by approximately $0.5 million versus the prior year, before eliminations.  The Company’s distribution operations in Singapore continued to experience record shipments for marine transmission products for use in various commercial applications.  This operation saw a 62.3% increase in sales versus the prior fiscal year’s record first six months.  The Company’s distribution operation in the Northwest of the United States and Southwest of Canada experienced a nearly 56% decrease in sales due to continued softness in the Canadian oil and gas market.  The Company’s distribution operation in Italy, which provides boat accessories and propulsion systems for the pleasure craft market, saw a decrease in sales of 6.7% due to continued weakness in the global pleasure craft and mega yacht markets.  The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a decrease in sales of nearly 12%.

The elimination for net inter/intra segment sales increased $0.1 million, including an unfavorable exchange movement of $0.6 million, accounting for the remainder of the net change in sales versus the same period last year.

Gross profit as a percentage of sales decreased 710 basis points to 29.6% of sales, compared to 36.7% of sales for the same period last year.  Gross profit for fiscal 2013’s first six months was significantly impacted by lower sales volumes, primarily due to lower shipments to the Company’s North American pressure pumping transmission customers (approximately $11.7 million), a less profitable mix related to the Company’s oil and gas transmission business (approximately $2.9 million), and unfavorable manufacturing efficiency and absorption due to lower volumes.

Year-to-date, ME&A expenses, as a percentage of sales, were 23.7 %, compared to 21.9 % for the fiscal 2012 first six months.  For the fiscal 2013 first half, ME&A expenses decreased $2.6 million versus the same period last fiscal year.  Stock based compensation expense in the fiscal 2013 first half of $0.9 million decreased $1.5 million versus the same period a year ago.  In addition, the annual bonus expense decreased approximately $1.9 million versus the prior year’s first six months.  Year-to-date, movements in foreign exchange rates decreased ME&A expenses by $0.8 million versus the comparable period a year ago.  The net remaining increase primarily relates to increased research and development activities, age inflation and additional headcount, partially offset by lower pension expense.

Interest expense of $0.6 million for the first six months was down 14.1% versus last fiscal year’s first six months.  Total interest on the Company’s $40 million revolving credit facility (“revolver”) increased 4% to $0.2 million in fiscal 2013’s first six months versus the same period a year ago.  This increase can be attributed to an overall increase in the average borrowing year-over-year, partially offset by a decrease in the interest rate on the revolver.  The average borrowing on the revolver, computed monthly, increased to $19.7 million in fiscal 2013’s first six months, compared to $17.9 million in the same period a year ago.  The interest rate on the revolver decreased from a range of 1.74% to 2.12% in the prior fiscal year’s first half to a range of 1.71% to 1.75% in the current year.  The interest expense on the Company’s $25 million Senior Note decreased 20%, at a fixed rate of 6.05%, to $0.4 million, due to a lower remaining principal balance.

The effective tax rate for the first half of fiscal 2013 is 38.3 percent, which is slightly higher than the prior year rate of 35.5 percent.  The current year rate is somewhat inflated due to the non-deductibility of the losses in certain foreign jurisdictions during the first half, due to an ongoing valuation allowance determination, on an overall reduced earnings base.  The favorable impact of the recently extended research and development tax credit will be recorded in the third fiscal quarter, as it was signed January 2, 2013.  The Company estimates the favorable impact of this item to be approximately $0.5 million.

Financial Condition, Liquidity and Capital Resources

Comparison between December 28, 2012 and June 30, 2012

As of December 28, 2012, the Company had net working capital of $132.3 million, which represents an increase of $1.7 million, or just over 1%, from the net working capital of $130.5 million as of June 30, 2012.

Cash increased $4.9 million to $20.6 million as of December 28, 2012, versus $15.7 million as of June 30, 2012.  The majority of the cash as of December 28, 2012 is at our overseas operations in Europe and Asia-Pacific.

Trade receivables of $38.5 million were down $25.0 million, or nearly 40%, when compared to last fiscal year-end.  The impact of foreign currency translation was to increase accounts receivable by $0.8 million versus June 30, 2012.  The net remaining decrease is consistent with the sales volume decrease versus the fourth quarter of fiscal 2012.  Historically, the fourth fiscal quarter generally is the strongest sales quarter of the fiscal year.

Net inventory increased by $15.1 million versus June 30, 2012 to $118.3 million.  The impact of foreign currency translation was to increase net inventory by $2.1 million versus June 30, 2012.  After adjusting for the impact of foreign currency translation, the net increase of $13.0 million primarily came at the Company’s domestic manufacturing and Asian distribution locations.  The increase was driven primarily by an elevated level of oil and gas transmissions inventory that has yet to work its way through sales as well as increased inventory to meet increased demand from North American and Asian commercial marine markets.  On a consolidated basis, as of December 28, 2012, the Company’s backlog of orders to be shipped over the next six months approximates $68.2 million, compared to $98.7 million at June 30, 2012 and $148.5 million at December 30, 2011.  The majority of the decrease is being experienced at the Company’s domestic manufacturing location due to continued softness in the North American pressure pumping transmission market.  As a percentage of six month backlog, inventory has increased from 104% at June 30, 2012 to 173% at December 28, 2012.

Net property, plant and equipment (PP&E) decreased $0.6 million versus June 30, 2012.  This includes the addition of $3.5 million in capital expenditures, primarily at the Company’s Racine-based manufacturing operation, which was partially offset by depreciation of $5.0 million.  The net remaining decrease is due to foreign currency translation effects.  In total, the Company expects to invest approximately $10 million in capital assets in fiscal 2013.  The Company continues to review its capital plans based on overall market conditions and availability of capital, and may make changes to its capital plans accordingly.  In addition, the quoted lead times on certain manufacturing equipment purchases may push some of the capital expenditures into the next fiscal year.  In fiscal 2012, the Company spent $13.7 million for capital expenditures, up from $12.0 million and $4.5 million in fiscal years 2011 and 2010, respectively.  The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and expanding capacity at its facilities around the world.

Accounts payable as of December 28, 2012 of $24.4 million were up $0.8 million, or 3.5%, from June 30, 2012.  The impact of foreign currency translation was to increase accounts payable by $0.7 million versus June 30, 2012.

Total borrowings and long-term debt as of December 28, 2012 increased by $1.8 million, or roughly 6%, to $34.0 million versus June 30, 2012.  This increase was driven by the overall increase in working capital levels, primarily driven by an increase in inventory and a net decrease in accrued liabilities, and the repurchase of $3.1 million (185,000 shares) of the Company’s stock.  These were substantially offset by a nearly $25 million reduction in accounts receivable.  In addition, the Company made payments for its annual incentive program in the first fiscal quarter of 2012 based on the achievement of fiscal 2012 targets.

Total equity increased $4.6 million, or 3%, to $141.1 million as of December 28, 2012.  Retained earnings increased by $2.5 million.  The net increase in retained earnings included $4.6 million in net earnings attributable to Twin Disc for the first six months offset by $2.1 million in dividend payments.  Net favorable foreign currency translation of $3.4 million was reported.  In addition, the adjustment for the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans was $1.3 million.  The net remaining movement of $2.6 million primarily relates to changes in Treasury Stock, including the repurchase of 185,000 shares of the Company’s stock for $3.1 million in the second fiscal quarter.

In December 2002, the Company entered into a $20,000,000 revolving loan agreement with M&I Marshall & Ilsley Bank (“M&I”), which had an original expiration date of October 31, 2005.  Through a series of amendments, the last of which was agreed to during the fourth quarter of fiscal 2011, the total commitment was increased to $40,000,000 and the term was extended to May 31, 2015.  This agreement contains certain covenants, including restrictions on investments, acquisitions and indebtedness.  Financial covenants include a minimum consolidated net worth, minimum EBITDA for the most recent four fiscal quarters of $11,000,000 at December 28, 2012, and a maximum total funded debt to EBITDA ratio of 3.0 at December 28, 2012.  As of December 28, 2012, the Company was in compliance with these covenants with a four quarter EBITDA total of $40,156,000 and a funded debt to EBITDA ratio of 0.85.  The minimum net worth covenant fluctuates based upon actual earnings and is subject to adjustment for certain pension accounting adjustments to equity.  As of December 28, 2012 the minimum equity requirement was $119,373,000 compared to an actual result of $174,177,000 after all required adjustments.  The outstanding balance of $19,500,000 and $17,550,000 at December 28, 2012 and June 30, 2012, respectively, is classified as long-term debt.  In accordance with the loan agreement as amended, the Company can borrow at LIBOR plus an additional “Add-On,” between 1.5% and 2.5%, depending on the Company’s Total Funded Debt to EBITDA ratio.  The rate was 1.71% and 1.74% at December 28, 2012 and June 30, 2012, respectively.

On April 10, 2006, the Company entered into a Note Agreement (the “Note Agreement”) with The Prudential Insurance Company of America and certain other entities (collectively, “Purchasers”).  Pursuant to the Note Agreement, Purchasers acquired, in the aggregate, $25,000,000 in 6.05% Senior Notes due April 10, 2016 (the “Notes”).  The Notes mature and become due and payable in full on April 10, 2016 (the “Payment Date”).  Prior to the Payment Date, the Company is obligated to make quarterly payments of interest during the term of the Notes, plus prepayments of principal of $3,571,429 on April 10 of each year from 2010 to 2015, inclusive.  The outstanding balance was $14,285,714 at December 28, 2012 and June 30, 2012, respectively.  Of the outstanding balance, $3,571,429 was classified as a current maturity of long-term debt at December 28, 2012 and June 30, 2012, respectively.  The remaining $10,714,286 is classified as long-term debt. The Company also has the option of making additional prepayments subject to certain limitations, including the payment of a Yield-Maintenance Amount as defined in the Note Agreement.  In addition, the Company will be required to make an offer to purchase the Notes upon a Change of Control, and any such offer must include the payment of a Yield-Maintenance Amount.  The Note Agreement includes certain financial covenants which are identical to those associated with the revolving loan agreement discussed above.  The Note Agreement also includes certain restrictive covenants that limit, among other things, the incurrence of additional indebtedness and the disposition of assets outside the ordinary course of business.  The Note Agreement provides that it shall automatically include any covenants or events of default not previously included in the Note Agreement to the extent such covenants or events of default are granted to any other lender of an amount in excess of $1,000,000.  Following an Event of Default, each Purchaser may accelerate all amounts outstanding under the Notes held by such party.

On November 19, 2012, the Company and its wholly-owned subsidiary Twin Disc International, S.A. entered into a multi-currency revolving Credit Agreement with Wells Fargo Bank, National Association.  Pursuant to the Credit Agreement, the Company may, from time to time, enter into revolving credit loans in amounts not to exceed, in the aggregate, Wells Fargo’s revolving credit commitment of $15,000,000.  In general, outstanding revolving credit loans (other than foreign currency loans) will bear interest at one of the following rates, as selected by the Company: (1) a “Base Rate,” which is equal to the highest of (i) the prime rate; (ii) the federal funds rate plus 0.50%; or (iii) LIBOR plus 1.00%; or (2) a “LIBOR Rate” (which is equal to LIBOR divided by the difference between 1.00 and the Eurodollar Reserve Percentage (as defined in the Credit Agreement)) plus 1.50%.  Outstanding revolving credit loans that are foreign currency loans will bear interest at the LIBOR Rate plus 1.50%, plus an additional “Mandatory Cost,” which is designed to compensate Wells Fargo for the cost of compliance with the requirements of the Bank of England and/or the Financial Services Authority, or the requirements of the European Central Bank.  In addition to principal and interest payments, the Borrowers will be responsible for paying monthly commitment fees equal to .25% of the unused revolving credit commitment.  The Company has the option of making additional prepayments subject to certain limitations.  The Credit Agreement includes financial covenants regarding minimum net worth, minimum EBITDA for the most recent four fiscal quarters of $11,000,000, and a maximum total funded debt to EBITDA ratio of 3.0:1.  The Credit Agreement also includes certain restrictive covenants that limit, among other things, certain investments, acquisitions and indebtedness.  The Credit Agreement provides that it shall automatically include any covenants or events of default not previously included in the Credit Agreement to the extent such covenants or events of default are granted to any other lender of an amount in excess of $1,000,000.  The Credit Agreement also includes customary events of default, including events of default under the M&I agreement or the Prudential Note Agreement.  Following an event of default, Wells Fargo may accelerate all amounts outstanding under any revolving credit notes or the Credit Agreement.  The Credit Agreement is scheduled to expire on May 31, 2015.  As of December 28, 2012, there were no borrowings under the Credit Agreement.

Four quarter EBITDA and total funded debt are non-GAAP measures, and are included herein for the purpose of disclosing the status of the Company’s compliance with the four quarter EBITDA covenant and the total funded debt to four quarter EBITDA ratio covenant described above.  In accordance with the Company’s revolving loan agreement with M&I and the Note Agreement:

·   “Four quarter EBITDA” is defined as “the sum of (i) Net Income plus, to the extent deducted in the calculation of Net Income, (ii) interest expense, (iii) depreciation and amortization expense, and (iv) income tax expense;” and

·   “Total funded debt” is defined as “(i) all Indebtedness for borrowed money (including without limitation, Indebtedness evidenced by promissory notes, bonds, debentures and similar interest-bearing instruments), plus (ii) all purchase money Indebtedness, plus (iii) the principal portion of capital lease obligations, plus (iv) the maximum amount which is available to be drawn under letters of credit then outstanding, all as determined for the Company and its consolidated Subsidiaries as of the date of determination, without duplication, and in accordance with generally accepted accounting principles applied on a consistent basis.”

·   “Total funded debt to four quarter EBITDA” is defined as the ratio of total funded debt to four quarter EBITDA calculated in accordance with the above definitions.

The Company’s total funded debt as of December 28, 2012 and June 30, 2012 was equal to the total debt reported on the Company’s December 28, 2012 and June 30, 2012 Condensed Consolidated Balance Sheet, and therefore no reconciliation is included herein.  The following table sets forth the reconciliation of the Company’s reported Net Earnings to the calculation of four quarter EBITDA for the four quarters ended December 28, 2012:

Four Quarter EBITDA Reconciliation
Net Earnings	$15,838,000
Depreciation & Amortization	10,790,000
Interest Expense	1,370,000
Income Taxes	12,158,000
Four Quarter EBITDA	$40,156,000
Total Funded Debt to Four Quarter EBITDA
Total Debt	$33,994,000
Divided by: Four Quarter EBITDA	40,156,000
Total Funded Debt to Four Quarter EBITDA	0.85

As of December 28, 2012, the Company was in compliance with all of the covenants described above.  As of December 28, 2012, the Company’s backlog of orders scheduled for shipment during the next six months (six-month backlog) was $68.2 million, or approximately 31% lower than the six-month backlog of $98.7 million as of June 30, 2012.  In spite of the decrease in order backlog driven primarily by the recent decline in the North American oil and gas market, as rig operators adjust to the natural gas supply overhang and lower prices, the Company does not expect to violate any of its financial covenants in fiscal 2013.  The current margin surrounding ongoing compliance with the above covenants, in particular, minimum EBITDA for the most recent four fiscal quarters and total funded debt to EBITDA, are expected to continue to decrease in fiscal 2013.  Please see the factors discussed under Item 1A, Risk Factors, of the Company’s Annual Report filed on Form 10-K for June 30, 2012 for further discussion of this topic.

The Company’s balance sheet remains very strong, there are no off-balance-sheet arrangements other than the operating leases listed below, and we continue to have sufficient liquidity for near-term needs.  The Company had $20.5 million of available borrowings on our $40 million revolving loan agreement as of December 28, 2012 as well as $15 million available under its recently announced multi-currency revolver agreement with Wells Fargo Bank.  The Company expects to continue to generate enough cash from operations to meet our operating and investing needs.  As of December 28, 2012, the Company also had cash of $20.6 million, primarily at its overseas operations.  These funds, with some restrictions, are available for repatriation as deemed necessary by the Company.  In fiscal 2012, the Company expects to contribute $4.4 million to its defined benefit pension plans, the minimum contributions required.  However, if the Company elects to make voluntary contributions in fiscal 2012, it intends to do so using cash from operations and, if necessary, from available borrowings under existing credit facilities.  As of December 28, 2012, $3.6 million in contributions have been made.

As of December 28, 2012, the Company has obligations under non-cancelable operating lease contracts and loan and senior note agreements for certain future payments.  A summary of those commitments follows (in thousands):

Contractual Obligations	Total	Less than 1 year	1-3 Years	3-5 Years	After 5 Years
Revolver borrowing	$19,500		$19,500
Long-term debt	$14,494	$3,697	$7,197	$3,572	$28
Operating leases	$6,981	$3,120	$2,705	$1,156
Total obligations	$40,975	$6,817	$29,402	$4,728	$28

The table above does not include tax liabilities related to uncertain income tax positions totaling $1.5 million, excluding related interest and penalties, as the timing of their resolution can not be estimated.  See Note H of the Condensed Consolidated Financial Statements for disclosures surrounding uncertain income tax positions.

The Company maintains defined benefit pension plans for some of its operations in the United States and Europe.  The Company has established the Pension Committee to manage the operations and administration of the defined benefit plans.  The Company estimates that fiscal 2013 contributions to all defined benefit plans will total $4.4 million.  As of December 28, 2012, $3.6 million in contributions have been made.

New Accounting Releases

In July 2012, the Financial Accounting Standards Board (“FASB”) issued amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment.  After an assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test.  Otherwise, the quantitative test is optional.  The amended guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted.  The adoption of this guidance is not expected to have a material impact on the Company’s financial results.

In September 2011, the FASB issued a standards update that is intended to simplify how entities test goodwill for impairment.  This update permits an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350 “Intangibles-Goodwill and Other.”  This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (the Company’s fiscal 2013).  This standards update is not expected to have a material impact on the Company’s financial statements.

Critical Accounting Policies

The preparation of this Quarterly Report requires management’s judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  There can be no assurance that actual results will not differ from those estimates.

Twin Disc’s critical accounting policies are described in Item 7 of the Company’s Annual Report filed on Form 10-K for June 30, 2012.  There have been no significant changes to those accounting policies subsequent to June 30, 2012.

Item 3.                      Quantitative and Qualitative Disclosure About Market Risk

The Company is exposed to market risks from changes in interest rates, commodities and foreign exchange.  To reduce such risks, the Company selectively uses financial instruments and other pro-active management techniques.  All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which prohibit the use of financial instruments for trading or speculative purposes.

Interest rate risk - The Company’s earnings exposure related to adverse movements of interest rates is primarily derived from outstanding floating rate debt instruments that are indexed to the prime and LIBOR interest rates.  In accordance with the $40,000,000 revolving loan agreement expiring May 31, 2015, the Company has the option of borrowing at the prime interest rate or LIBOR plus an additional “Add-On”, between 1.5% and 2.5%, depending on the Company’s Total Funded Debt to EBITDA ratio.  Due to the relative stability of interest rates, the Company did not utilize any financial instruments at December 28, 2012 to manage interest rate risk exposure.  A 10 percent increase or decrease in the applicable interest rate would result in a change in pretax interest expense of approximately $33,000.

Commodity price risk - The Company is exposed to fluctuation in market prices for such commodities as steel and aluminum.  The Company does not utilize commodity price hedges to manage commodity price risk exposure.

Stock market risk - The Company’s earnings are exposed to stock market risk relative to the Performance Stock Unit Awards.  These are cash based awards which are revalued at the end of each reporting period based upon the Company’s closing stock price as of the end of the period.  A one dollar increase or decrease in the Company’s stock price would result in a decrease or increase, respectively, in earnings from operations of approximately $98,000 as of December 28, 2012.  These awards were valued based upon the average of the high and low of the Company’s December 28, 2012 stock price of $17.06.

Currency risk - The Company has exposure to foreign currency exchange fluctuations.  Approximately 21% of the Company’s revenues in the six months ended December 28, 2012 were denominated in currencies other than the U.S. dollar.  Of that total, approximately 70% was denominated in euros with the balance composed of Japanese yen, the Swiss franc and the Australian and Singapore dollars.  The Company does not hedge the translation exposure represented by the net assets of its foreign subsidiaries.  Foreign currency translation adjustments are recorded as a component of shareholders’ equity.  Forward foreign exchange contracts are occasionally used to hedge the currency fluctuations on significant transactions denominated in foreign currencies.

Derivative financial instruments - The Company has written policies and procedures that place all financial instruments under the direction of the Company corporate treasury and restrict derivative transactions to those intended for hedging purposes.  The use of financial instruments for trading purposes is prohibited.  The Company occasionally uses financial instruments to manage the market risk from changes in foreign exchange rates.

The Company primarily enters into forward exchange contracts to reduce the earnings and cash flow impact of non-functional currency denominated receivables and payables.  These contracts are highly effective in hedging the cash flows attributable to changes in currency exchange rates.  Gains and losses resulting from these contracts offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged.  The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions.  Gains and losses on these contracts are recorded in Other expense, net in the Condensed Consolidated Statement of Operations as the changes in the fair value of the contracts are recognized and generally offset the gains and losses on the hedged items in the same period.  The primary currency to which the Company was exposed in fiscal 2013 and 2012 was the euro.  The Company had no outstanding forward exchange contracts at December 28, 2012 or June 30, 2012.

Item 4.                      Controls and Procedures

(a)           Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)) as of the end of the period covered by this report.  Based on such evaluation,  the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.

(b)           Changes in Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  During the period covered by this report, no changes were made which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.

Part II.                      OTHER INFORMATION

Item 1.                      Legal Proceedings

Twin Disc is a defendant in several product liability or related claims which are considered either adequately covered by appropriate liability insurance or involving amounts not deemed material to the business or financial condition of the Company.

Item 1A.                      Risk Factors

There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of our 2012 Annual Report on Form 10-K.

Item 2.                      Unregistered Sales of Equity Securities and Use of Proceeds

(a)   Unregistered Sales of Equity Securities

There were no securities of the Company sold by the Company during the six months ended December 28, 2012, which were not registered under the Securities Act of 1933, in reliance upon an exemption from registration provided by Section 4 (2) of the Act.

(b)   Use of Proceeds

Not applicable.

(c)   Issuer Purchases of Equity Securities

Issuer Purchases of Equity Securities

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Sept. 29, 2012 – Oct. 26, 2012	0	NA	0	500,000
Oct. 27, 2012 – Nov. 30, 2012	85,050	$16.02	85,050	414,950
Dec. 1, 2012 – Dec. 28, 2012	99,950	$17.07	99,950	315,000
Total	185,000	$16.59	185,000	315,000

On February 1, 2008, the Board of Directors authorized the purchase of up to 500,000 shares of Common Stock at market values, of which 250,000 shares were purchased during fiscal 2009 and 125,000 shares were purchased during fiscal 2012.  On July 27, 2012, the Board of Directors authorized the purchase of an additional 375,000 shares of Common Stock at market values.  This authorization has no expiration.  During the second quarter of fiscal 2013, the Company purchased 185,000 shares under this authorization.

Item 3.                      Defaults Upon Senior Securities

None.

Item 5.                      Other Information

None.

Item 6.                      Exhibits

31a Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31b Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32a Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32b Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Schema

101.CAL XBRL Calculation Linkbase

101.DEF XBRL Definition Linkbase

101.LAB XBRL Label Linkbase

101.PRE XBRL Presentation Linkbase

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TWIN DISC, INCORPORATED
	(Registrant)
Date:  February 6, 2013	/s/ JEFFREY S. KNUTSON
	Jeffrey S. Knutson
	Corporate Controller
	Chief Accounting Officer

EX-31.A

Exhibit 31a

CERTIFICATION

I, Michael E. Batten, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Twin Disc, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s second fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 6, 2013	/s/ MICHAEL E. BATTEN
	Michael E. Batten
	Chairman and Chief Executive Officer

EX-31.B

Exhibit 31b

CERTIFICATIONS

I, Christopher J. Eperjesy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Twin Disc, Incorporated;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s second fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  February 6, 2013	/s/ CHRISTOPHER J. EPERJESY
	Christopher J. Eperjesy
	Vice President – Finance, Chief Financial Officer and Treasurer

EX-32.A

EXHIBIT 32a

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Twin Disc, Incorporated (the “Company”) on Form 10-Q for the fiscal quarter ending December 28, 2012, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, Michael E. Batten, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  February 6, 2013	/s/ MICHAEL E. BATTEN
	Michael E. Batten
	Chairman and Chief Executive Officer

EX-32.B

EXHIBIT 32b

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Twin Disc, Incorporated (the “Company”) on Form 10-Q for the fiscal quarter ending December 28, 2012, as filed with the Securities and Exchange Commission as of the date hereof (the “Report”), I, Christopher J. Eperjesy, Vice President – Finance, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  February 6, 2013	/s/ CHRISTOPHER J. EPERJESY
	Christopher J. Eperjesy
	Vice President – Finance, Chief Financial Officer and Treasurer

XML

Income Taxes (Details) (USD $)	6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011
Income Taxes [Abstract]
Effective income tax rate (in hundredths)	38.30%	35.50%
Change in Increase in foreign earnings and change in tax reserve	$ (380,000)
Unrecognized tax benefits if recognized would favorably impact effective tax rate	1,500,000
Decrease in unrecognized tax benefits anticipated upon final settlement	$ 305,000
Income Tax Examination [Line Items]
Number of audit cycles to be completed	1
Italy, Belgium, and Japan [Member]
Income Tax Examination [Line Items]
Tax years that remain subject to examination	2008 through 2011
U.S. [Member]
Income Tax Examination [Line Items]
Tax years that remain subject to examination	subsequent to fiscal 2011
Wisconsin State [Member]
Income Tax Examination [Line Items]
Tax years that remain subject to examination	2001 through 2009

XML

Long-term Debt (Tables)

6 Months Ended

Dec. 28, 2012

Long-term Debt [Abstract]

Long-term Debt

Long-term debt at December 28, 2012 and June 30, 2012 consisted of the following (in thousands):

	December 28,	June 30,
	2012	2012
Revolving loan	$19,500	$17,550
10-year unsecured senior notes	14,286	14,286
Other	208	309
Subtotal	33,994	32,145
Less: current maturities and short-term borrowings	(3,697)	(3,744)
Total long-term debt	$30,297	$28,401

XML

Warranty

6 Months Ended

Dec. 28, 2012

Warranty [Abstract]

Warranty

C.     Warranty

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers. However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation. The warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends. While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires. The following is a listing of the activity in the warranty reserve during the three and six month periods ended December 28, 2012 and December 30, 2011 (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Reserve balance, beginning of period	$5,462	$6,583	$5,745	$6,022
Current period expense	1,086	317	1,967	1,781
Payments or credits to customers	(1,066)	(906)	(2,251)	(1,679)
Foreign currency translation	51	(111)	72	(241)
Reserve balance, end of period	$5,533	$5,883	$5,533	$5,883

The current portion of the warranty accrual ($3,812,000) is reflected in accrued liabilities, while the long-term portion ($1,721,000) is included in other long-term liabilities on the Consolidated Balance Sheets.

XML

Warranty (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011
Activity in warranty reserve [Abstract]
Reserve balance, beginning of period	$ 5,462,000	$ 6,583,000	$ 5,745,000	$ 6,022,000
Current period expense	1,086,000	317,000	1,967,000	1,781,000
Payments or credits to customers	(1,066,000)	(906,000)	(2,251,000)	(1,679,000)
Foreign currency translation	51,000	(111,000)	72,000	(241,000)
Reserve balance, end of period	5,533,000	5,883,000	5,533,000	5,883,000
Current portion of warranty accrual	3,812,000		3,812,000
Long-term portion of warranty accrual	$ 1,721,000		$ 1,721,000

XML

Inventory (Details) (USD $) In Thousands, unless otherwise specified	Dec. 28, 2012	Jun. 30, 2012
Major classes of inventories [Abstract]
Finished parts	$ 78,710	$ 62,909
Work-in-process	13,983	16,608
Raw materials	25,605	23,661
Total Inventories	$ 118,298	$ 103,178

XML

Business Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011	Jun. 30, 2012
Business Segments [Abstract]
Number of reportable segments			2
Segment Reporting Information [Line Items]
Net sales	$ 72,325	$ 82,941	$ 141,118	$ 164,271
Net earnings attributable to Twin Disc	3,360	5,840	4,591	15,496
Assets	299,576		299,576		303,832
Corporate and eliminations [Member]
Segment Reporting Information [Line Items]
Net earnings attributable to Twin Disc	(3,246)	(3,484)	(6,001)	(4,712)
Assets	(46,335)		(46,335)		(26,541)
Manufacturing segment [Member]
Segment Reporting Information [Line Items]
Net sales	66,914	78,044	125,196	149,027
Net earnings attributable to Twin Disc	5,055	8,259	7,889	16,978
Assets	282,930		282,930		272,098
Manufacturing segment [Member] | Inter/Intra segment elimination [Member]
Segment Reporting Information [Line Items]
Net sales	(23,522)	(22,280)	(39,080)	(41,949)
Distribution segment [Member]
Segment Reporting Information [Line Items]
Net sales	33,742	29,082	64,745	63,177
Net earnings attributable to Twin Disc	1,551	1,065	2,703	3,230
Assets	62,981		62,981		58,275
Distribution segment [Member] | Inter/Intra segment elimination [Member]
Segment Reporting Information [Line Items]
Net sales	$ (4,809)	$ (1,905)	$ (9,743)	$ (5,984)

XML

Stock-Based Compensation (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011
Performance Stock Unit Awards [Member]
Schedule Of Share Based Compensation Arrangements by Options Activity and Exercise Price Range [Line Items]
Stock awards granted (in shares)			28,255	15,449
Stock awards vesting period			3 years	3 years
Number of shares of common stock that can be granted, maximum (in shares)	33,906	18,539	33,906	18,539
Unvested stock awards outstanding (in shares)	161,734	243,647	161,734	243,647
Compensation cost, recognized	$ (58,000)	$ 2,016,000	$ 120,000	$ 1,051,000
Performance Stock Awards [Member]
Schedule Of Share Based Compensation Arrangements by Options Activity and Exercise Price Range [Line Items]
Stock awards granted (in shares)			28,535	15,335
Stock awards vesting period			3 years	3 years
Number of shares of common stock that can be granted, maximum (in shares)	34,242	18,402	34,242	18,402
Unvested stock awards outstanding (in shares)	130,926	191,398	130,926	191,398
Compensation cost, recognized	(164,000)	214,000	15,000	411,000
Restricted Stock [Member]
Schedule Of Share Based Compensation Arrangements by Options Activity and Exercise Price Range [Line Items]
Stock awards granted (in shares)			83,729	43,620
Unvested stock awards outstanding (in shares)	220,343	250,323	220,343	250,323
Compensation cost, recognized	$ 400,000	$ 364,000	$ 788,000	$ 706,000
Restricted Stock [Member] | Minimum [Member]
Schedule Of Share Based Compensation Arrangements by Options Activity and Exercise Price Range [Line Items]
Stock awards vesting period			1 year
Restricted Stock [Member] | Maximum [Member]
Schedule Of Share Based Compensation Arrangements by Options Activity and Exercise Price Range [Line Items]
Stock awards vesting period			4 years

XML

Inventory

6 Months Ended

Dec. 28, 2012

Inventory [Abstract]

Inventory

B. Inventory

The major classes of inventories were as follows (in thousands):

	December 28,		June 30,
	2012		2012
Inventories:
Finished parts	$	78,710	$	62,909
Work in process		13,983		16,608
Raw materials		25,605		23,661
	$	118,298	$	103,178

XML

Pension and Other Postretirement Benefit Plans (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011
Pension Benefits [Member]
Components of net periodic benefit cost [Abstract]
Service cost	$ 49	$ 53	$ 93	$ 99
Interest cost	1,311	1,517	2,619	3,027
Expected return on plan assets	(1,580)	(1,928)	(3,151)	(3,847)
Amortization of net loss	835	580	1,669	1,160
Net periodic benefit cost	615	222	1,230	439
Expected contribution to its pension plan in 2013	4,352,000		4,352,000
Contributions made during period			3,562,000
Postretirement Benefits [Member]
Components of net periodic benefit cost [Abstract]
Service cost	9	10	17	21
Interest cost	191	247	383	493
Amortization of net loss	197	105	395	210
Net periodic benefit cost	$ 397	$ 362	$ 795	$ 724

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 28, 2012	Jun. 30, 2012
Current assets:
Cash	$ 20,570	$ 15,701
Trade accounts receivable, net	38,465	63,438
Inventories, net	118,298	103,178
Deferred income taxes	4,555	3,745
Other	11,200	11,099
Total current assets	193,088	197,161
Property, plant and equipment, net	65,737	66,356
Goodwill, net	13,267	13,116
Deferred income taxes	13,109	14,335
Intangible assets, net	4,794	4,996
Other assets	9,581	7,868
Total assets	299,576	303,832
Current liabilities:
Short-term borrowings and current maturities of long-term debt	3,697	3,744
Accounts payable	24,367	23,550
Accrued liabilities	32,736	39,331
Total current liabilities	60,800	66,625
Long-term debt	30,297	28,401
Accrued retirement benefits	60,223	64,009
Deferred income taxes	3,816	3,340
Other long-term liabilities	3,291	4,948
Total liabilities	158,427	167,323
Twin Disc shareholders' equity:
Common shares authorized: 30,000,000; issued: 13,099,468; no par value	11,901	12,759
Retained earnings	186,842	184,306
Accumulated other comprehensive loss	(30,143)	(34,797)
Shareholders' equity before treasury stock	168,600	162,268
Less treasury stock, at cost (1,855,984 and 1,794,981 shares, respectively)	28,423	26,781
Total Twin Disc shareholders' equity	140,177	135,487
Noncontrolling interest	972	1,022
Total equity	141,149	136,509
Total liabilities and equity	$ 299,576	$ 303,832

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011
Cash flows from operating activities:
Net earnings	$ 4,685	$ 15,559
Adjustments to reconcile net earnings to net cash (used) provided by operating activities:
Depreciation and amortization	5,345	5,311
Other non-cash changes, net	1,599	3,756
Net change in working capital, excluding cash	463	(28,215)
Net cash provided (used) by operating activities	12,092	(3,589)
Cash flows from investing activities:
Acquisitions of fixed assets	(3,529)	(6,893)
Proceeds from sale of fixed assets	35	72
Other, net	(293)	(293)
Net cash used by investing activities	(3,787)	(7,114)
Cash flows from financing activities:
Proceeds from notes payable	42	0
Payments of notes payable	(93)	(52)
Proceeds from long-term debt, net	1,892	12,122
Proceeds from exercise of stock options	189	169
Dividends paid to shareholders	(2,055)	(1,828)
Dividends paid to noncontrolling interest	(204)	(130)
Acquisition of treasury stock	(3,069)	0
Excess tax benefits from stock compensation	1,276	535
Other	(1,700)	(185)
Net cash provided by financing activities	(3,722)	10,631
Effect of exchange rate changes on cash	286	(1,474)
Net change in cash	4,869	(1,546)
Cash:
Beginning of period	15,701	20,167
End of period	$ 20,570	$ 18,621

XML

Long-term Debt (Details) (USD $)	6 Months Ended
	Dec. 28, 2012	Jun. 30, 2012
Debt Instrument [Line Items]
Subtotal	$ 33,994,000	$ 32,145,000
Less: current maturities and short-term borrowings	(3,697,000)	(3,744,000)
Total long-term debt	30,297,000	28,401,000
Number of recent quarters considered for minimum EBITDA	4
US Treasury Yield Curve Rate (in hundredths)	0.36%	0.41%
Add-on to reference rate to calculate discount rate (in hundredths)	1.50%	1.50%
Revolving Loan [Member]
Debt Instrument [Line Items]
Subtotal	19,500,000	17,550,000
10-year Unsecured Senior Notes [Member]
Debt Instrument [Line Items]
Subtotal	14,286,000	14,286,000
Maturity period of unsecured senior notes	10 years
Fair value of long term debt	15,499,000	15,768,000
Maturity date of note agreement	Apr. 10, 2016
Other [Member]
Debt Instrument [Line Items]
Subtotal	$ 208,000	$ 309,000

XML

Business Segments (Tables)

6 Months Ended

Dec. 28, 2012

Business Segments [Abstract]

Summarized Information about Company's Segments

Information about the Company's segments is summarized as follows (in thousands):

	Three Months Ended						Six Months Ended
	Dec. 28,			Dec. 30,			Dec. 28,			Dec. 30,
	2012			2011			2012			2011
Manufacturing segment sales	$	66,914		$	78,044		$	125,196		$	149,027
Distribution segment sales		33,742			29,082			64,745			63,177
Inter/Intra segment elimination - manufacturing		(23,522	)		(22,280	)		(39,080	)		(41,949	)
Inter/Intra segment elimination - distribution		(4,809	)		(1,905	)		(9,743	)		(5,984	)
Net sales	$	72,325		$	82,941		$	141,118		$	164,271
Manufacturing segment net earnings	$	5,055		$	8,259		$	7,889		$	16,978
Distribution segment net earnings		1,551			1,065			2,703			3,230
Corporate and eliminations		(3,246	)		(3,484	)		(6,001	)		(4,712	)
Net earnings attributable to Twin Disc	$	3,360		$	5,840		$	4,591		$	15,496
	Dec. 28,			June 30,
Assets		2012			2012
Manufacturing segment assets	$	282,930		$	272,098
Distribution segment assets		62,981			58,275
Corporate assets and elimination
of inter-company assets		(46,335	)		(26,541	)
	$	299,576		$	303,832

XML

Shareholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended				12 Months Ended			6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012 Common Stock [Member]	Dec. 30, 2011 Common Stock [Member]	Jun. 30, 2012 Common Stock [Member]	Jul. 27, 2012 Common Stock [Member]	Feb. 01, 2008 Common Stock [Member]	Dec. 28, 2012 Retained Earnings [Member]	Dec. 30, 2011 Retained Earnings [Member]	Dec. 28, 2012 Accumulated Other Comprehensive Income (Loss) [Member]	Dec. 30, 2011 Accumulated Other Comprehensive Income (Loss) [Member]	Dec. 28, 2012 Treasury Stock [Member]	Dec. 30, 2011 Treasury Stock [Member]	Dec. 28, 2012 Non-Controlling Interest [Member]	Dec. 30, 2011 Non-Controlling Interest [Member]
Stockholders Equity [Line Items]
Number of shares authorize to repurchase (in shares)								375,000	500,000
Stock repurchased during period (in shares)					185,000		125,000
Balance, beginning of period			$ 136,509	$ 136,646	$ 12,759	$ 10,863	$ 10,863			$ 184,306	$ 161,449	$ (34,797)	$ (11,383)	$ (26,781)	$ (25,252)	$ 1,022	$ 969
Net income	3,419	5,849	4,685	15,559						4,591	15,496					94	63
Translation adjustments	2,130	(6,258)	3,394	(8,533)								3,334	(8,590)			60	57
Benefit plan adjustments, net of tax			1,320	885								1,320	885
Cash dividends			(2,259)	(1,958)						(2,055)	(1,828)					(204)	(130)
Compensation expense and windfall tax benefits			2,079	1,653	2,079	1,653
Shares (acquired) issued, net			(4,579)	(16)	(2,937)	(912)								(1,642)	896
Balance, end of period	$ 141,149	$ 144,236	$ 141,149	$ 144,236	$ 11,901	$ 11,604	$ 12,759			$ 186,842	$ 175,117	$ (30,143)	$ (19,088)	$ (28,423)	$ (24,356)	$ 972	$ 959

XML

Goodwill and Other Intangibles (Tables)

6 Months Ended

Dec. 28, 2012

Goodwill and Other Intangibles [Abstract]

Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill, all of which is allocated to the manufacturing segment, for the six months ended December 28, 2012 were as follows (in thousands):

Gross balance at June 30, 2012	$16,786
Accumulated impairment losses	(3,670)
Net balance at June 30, 2012	$13,116
Gross balance at June 30, 2012	$16,786
Translation adjustment	151
Gross balance at December 28, 2012	16,937
Accumulated impairment losses	(3,670)
Net balance at December 28, 2012	$13,267

Acquired Intangible Assets with Finite Lives

The gross carrying amount and accumulated amortization of the Company's intangible assets that have defined useful lives and are subject to amortization as of December 28, 2012 and June 30, 2012 were as follows (in thousands):

	December 28,	June 30,
	2012	2012
Intangible assets with finite lives:
Licensing agreements	$3,015	$3,015
Non-compete agreements	2,050	2,050
Other	5,991	5,991
	11,056	11,056
Accumulated amortization	(8,937)	(8,583)
Foreign currency translation	545	469
Total	$2,664	$2,942

Estimated Intangible Amortization Expense

Intangible amortization expense was $166,000 and $354,000 for the three and six months ended December 28, 2012, respectively, and $201,000 and $417,000 for the three and six months ended December 30, 2011, respectively. Estimated intangible amortization expense for the remainder of fiscal 2013 and each of the next five fiscal years is as follows (in thousands):

Fiscal Year
2013	$376
2014	722
2015	420
2016	280
2017	276
2018	276

XML

Basis of Presentation

6 Months Ended

Dec. 28, 2012

Basis of Presentation [Abstract]

Basis of Presentation

A. Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of the Company, include all adjustments, consisting only of normal recurring items, necessary for a fair presentation of results for each period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest Annual Report. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Revision of Prior Period Financial Statements

During the second quarter of fiscal 2013, the Company identified errors related to its reserve for uncertain tax positions that affected prior periods beginning in the year ended June 30, 2007 and subsequent periods through September 28, 2012. In evaluating whether the Company's previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standard Codification ("ASC") Topic 250, Accounting Changes and Error Corrections and ASC Topic 250-10-S99-1, Assessing Materiality. The Company concluded this error was not material individually or in the aggregate to any of the prior reporting periods. However, the cumulative error would be material in the year ended June 30, 2013, if the entire correction was recorded in the second quarter of fiscal 2013. As such, the revision for this correction to the applicable prior periods is reflected in the financial information herein and will be reflected in future filings containing such financial information. As a result of correcting the errors related to its reserve for uncertain tax positions, net earnings attributable to Twin Disc was decreased by $69,000, $50,000 and $104,000 in 2012, 2011 and 2010, respectively. The cumulative impact of this error correction prior to fiscal 2011 was to reduce shareholders' equity at June 30, 2010 by $658,000. In addition to recording this correcting adjustment, the Company recorded other adjustments to prior period amounts to correct other immaterial out-of-period adjustments related to income taxes, including those that had been previously disclosed. As a result of correcting these other immaterial out-of-period adjustments, net earnings attributable to Twin Disc was increased by $700,000 in 2012, decreased by $783,000 in 2011, and increased by $83,000 in 2010. The cumulative impact of these other immaterial out-of-period adjustments prior to fiscal 2011 was to increase shareholders' equity at June 30, 2010 by $83,000.

In addition, in the third quarter of fiscal 2012, the Company identified a prior period error in their first and second quarter 2012 condensed consolidated financial statements related to the cash flow statement classification of the excess tax benefit related to stock-based compensation. The excess tax benefit in the first and second quarter of fiscal 2012, in the amount of $445,000 and $90,000, respectively, was reflected in operating activities rather than financing activities in the condensed consolidated cash flow statement. There was no impact of the error on the condensed consolidated statement of comprehensive income or condensed consolidated balance sheet. The Company concluded this error was not material individually or in the aggregate to any of the prior periods. The revision for the correction is reflected in the financial information herein and will be reflected in future filings containing affected financial information.

The impacts of these revisions are shown in the following tables (in '000's):

	As of and for the period ended June 30, 2011				As of and for the period ended September 30, 2011
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	41,673	700	42,373		38,301	608	38,909
Total current liabilities	83,960	700	84,660		77,165	608	77,773
Other long term liabilities	7,089	708	7,797		4,363	725	5,088
Total liabilities	171,066	1,408	172,474		170,619	1,333	171,952
Retained earnings	162,857	(1,408)	161,449		171,524	(1,333)	170,191
Total equity	138,054	(1,408)	136,646		145,811	(1,333)	144,478
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	13,064	833	13,897		5,259	(75)	5,184
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net earnings attributable to Twin Disc	18,830	(833)	17,997		9,581	75	9,656
Basic earnings per share	1.66	(0.07)	1.59		0.84	0.01	0.85
Diluted earnings per share	1.64	(0.07)	1.57		0.83	0.01	0.84
Comprehensive income (loss)	49,743	(833)	48,910		7,834	75	7,909
Comprehensive income (loss) attributable to Twin Disc	49,608	(833)	48,775		7,780	75	7,855
Revised consolidated statement of cash flows amounts
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net change in working capital, excluding cash and debt, and other					(16,354)	(75)	(16,429)
Accrued liabilities	6,713	833	7,546
Other non-cash changes, net					2,950	(445)	2,505
Net cash used by operating activities					(1,196)	(445)	(1,641)
Excess tax benefits from stock comp					-	445	445
Net cash provided by financing activities					10,051	445	10,496
	As of and for the period ended December 30, 2011				As of and for the period ended March 30, 2012
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	38,056	608	38,664
Total current liabilities	77,872	608	78,480
Other long term liabilities	4,845	742	5,587		4,478	759	5,237
Total liabilities	170,822	1,350	172,172		168,130	759	168,889
Retained earnings	176,467	(1,350)	175,117		184,831	(759)	184,072
Total equity	145,586	(1,350)	144,236		157,231	(759)	156,472
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	8,627	(58)		8,569	14,039	(649)	13,390
Net earnings	15,501	58		15,559	24,939	649	25,588
Net earnings attributable to Twin Disc	15,438	58		15,496	24,831	649	25,480
Basic earnings per share	1.35	0.01		1.36	2.18	0.05	2.23
Diluted earnings per share	1.34	-		1.34	2.15	0.05	2.20
Comprehensive income (loss)	7,853	58		7,911	19,950	649	20,599
Comprehensive income (loss) attributable to Twin Disc	7,790	58		7,848	19,842	649	20,491
Quarter
Income taxes	3,368	17		3,385	5,412	(591)	4,821
Net earnings	5,866	(17)		5,849	9,438	591	10,029
Near earnings attributable to Twin Disc	5,857	(17)		5,840	9,393	591	9,984
Basic earnings per share	0.51	-		0.51	0.82	0.05	0.87
Diluted earnings per share	0.51	(0.01)		0.50	0.81	0.05	0.86
Comprehensive income (loss)	19	(17)		2	12,097	591	12,688
Comprehensive income (loss) attributable to Twin Disc	10	(17)		(7)	12,052	591	12,643
Revised consolidated statement of cash flows amounts
Net earnings	15,501	58		15,559	24,939	649	25,588
Net change in working capital, excluding cash and debt, and other	(28,157)	(58)		(28,215)	(41,315)	(649)	(41,964)
Accrued liabilities
Other non-cash changes, net	4,291	(535)		3,756
Net cash used by operating activities	(3,054)	(535)		(3,589)
Excess tax benefits from stock comp	-	535		535
Net cash provided by financing activities	10,096	535		10,631
	As of and for the period ended June 30, 2012				As of and for the period ended September 28, 2012
	Reported	Adjustment		Revised	Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Other long term liabilities	4,171	777		4,948	2,200	797	2,997
Total liabilities	166,546	777		167,323	160,512	797	161,309
Retained earnings	185,083	(777)		184,306	185,308	(797)	184,511
Total equity	137,286	(777)		136,509	139,587	(797)	138,790
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	18,446	(631)		17,815	1,077	20	1,097
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net earnings attributable to Twin Disc	26,112	631		26,743	1,251	(20)	1,231
Basic earnings per share	2.29	0.05		2.34	0.11	-	0.11
Diluted earnings per share	2.26	0.05		2.31	0.11	-	0.11
Comprehensive income (loss)	2,882	631		3,513	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	2,684	631		3,315	3,183	20	3,203
Quarter
Income taxes	4,407	18		4,425	1,077	20	1,097
Net earnings	1,371	(18)		1,353	1,286	(20)	1,266
Net earnings attributable to Twin Disc	1,281	(18)		1,263	1,251	(20)	1,231
Basic earnings per share	0.11	-		0.11	0.11	-	0.11
Diluted earnings per share	0.11	-		0.11	0.11	-	0.11
Comprehensive income (loss)	(17,068)	(18)		(17,086)	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	(17,158)	(18)		(17,176)	3,183	20	3,203
Revised consolidated statement of cash flows amounts
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net change in working capital, excluding cash and debt, and other					(4,059)	20	(4,039)
Accrued liabilities	(2,273)	(631)		(2,904)

New Accounting Releases

In July 2012, the Financial Accounting Standards Board ("FASB") issued amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment. After an assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test. Otherwise, the quantitative test is optional. The amended guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company's financial results.

In September 2011, the FASB issued a standards update that is intended to simplify how entities test goodwill for impairment. This update permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350 "Intangibles-Goodwill and Other." This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (the Company's fiscal 2013). This standards update is not expected to have a material impact on the Company's financial statements.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Dec. 28, 2012	Jun. 30, 2012
Twin Disc shareholders' equity:
Common stock, shares authorized (in shares)	30,000,000	30,000,000
Common stock, shares issued (in shares)	13,099,468	13,099,468
Common stock, no par value (in dollars per share)	$ 0	$ 0
Treasury stock, shares (in shares)	1,855,984	1,794,981

XML

Shareholders' Equity

6 Months Ended

Dec. 28, 2012

Shareholders' Equity [Abstract]

Shareholders' Equity

K.    Shareholders' Equity

On February 1, 2008, the Board of Directors authorized the purchase of 500,000 shares of Common Stock at market values. On July 27, 2012, the Board of Directors authorized the purchase of an additional 375,000 shares of Common Stock at market values. These authorizations have no expiration. The Company purchased 125,000 shares of its outstanding Common Stock in the fourth quarter of fiscal 2012 and 185,000 shares in the first six months of fiscal 2013.

The following is a reconciliation of the Company's equity balances for the first fiscal six months of 2012 and 2013 (in thousands):
	Twin Disc, Inc. Shareholders' Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance –June 30, 2011	$10,863	$161,449	($11,383)	($25,252)	$969	$136,646
Net income		15,496			63	15,559
Translation adjustments			(8,590)		57	(8,533)
Benefit plan adjustments, net of tax			885			885
Cash dividends		(1,828)			(130)	(1,958)
Compensation expense and
windfall tax benefits	1,653					1,653
Shares (acquired) issued, net	(912)			896		(16)
Balance-December 30, 2011	$11,604	$175,117	($19,088)	($24,356)	$959	$144,236
	Twin Disc, Inc. Shareholders' Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance-June 30, 2012	$12,759	$184,306	($34,797)	($26,781)	$1,022	$136,509
Net income		4,591			94	4,685
Translation adjustments			3,334		60	3,394
Benefit plan adjustments, net of tax			1,320			1,320
Cash dividends		(2,055)			(204)	(2,259)
Compensation expense and
windfall tax benefits	2,079					2,079
Shares (acquired) issued, net	(2,937)			(1,642)		(4,579)
Balance-December 28, 2012	$11,901	$186,842	($30,143)	($28,423)	$972	$141,149

XML

Document and Entity Information	6 Months Ended
	Dec. 28, 2012	Jan. 25, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	TWIN DISC INC
Entity Central Index Key	0000100378
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		11,243,484
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 28, 2012

XML

Basis of Presentation (Policies)

6 Months Ended

Dec. 28, 2012

Basis of Presentation [Abstract]

Revision of Prior Period Financial Statements

Revision of Prior Period Financial Statements

During the second quarter of fiscal 2013, the Company identified errors related to its reserve for uncertain tax positions that affected prior periods beginning in the year ended June 30, 2007 and subsequent periods through September 28, 2012. In evaluating whether the Company's previously issued consolidated financial statements were materially misstated, the Company considered the guidance in Accounting Standard Codification ("ASC") Topic 250, Accounting Changes and Error Corrections and ASC Topic 250-10-S99-1, Assessing Materiality. The Company concluded this error was not material individually or in the aggregate to any of the prior reporting periods. However, the cumulative error would be material in the year ended June 30, 2013, if the entire correction was recorded in the second quarter of fiscal 2013. As such, the revision for this correction to the applicable prior periods is reflected in the financial information herein and will be reflected in future filings containing such financial information. As a result of correcting the errors related to its reserve for uncertain tax positions, net earnings attributable to Twin Disc was decreased by $69,000, $50,000 and $104,000 in 2012, 2011 and 2010, respectively. The cumulative impact of this error correction prior to fiscal 2011 was to reduce shareholders' equity at June 30, 2010 by $658,000. In addition to recording this correcting adjustment, the Company recorded other adjustments to prior period amounts to correct other immaterial out-of-period adjustments related to income taxes, including those that had been previously disclosed. As a result of correcting these other immaterial out-of-period adjustments, net earnings attributable to Twin Disc was increased by $700,000 in 2012, decreased by $783,000 in 2011, and increased by $83,000 in 2010. The cumulative impact of these other immaterial out-of-period adjustments prior to fiscal 2011 was to increase shareholders' equity at June 30, 2010 by $83,000.

In addition, in the third quarter of fiscal 2012, the Company identified a prior period error in their first and second quarter 2012 condensed consolidated financial statements related to the cash flow statement classification of the excess tax benefit related to stock-based compensation. The excess tax benefit in the first and second quarter of fiscal 2012, in the amount of $445,000 and $90,000, respectively, was reflected in operating activities rather than financing activities in the condensed consolidated cash flow statement. There was no impact of the error on the condensed consolidated statement of comprehensive income or condensed consolidated balance sheet. The Company concluded this error was not material individually or in the aggregate to any of the prior periods. The revision for the correction is reflected in the financial information herein and will be reflected in future filings containing affected financial information.

The impacts of these revisions are shown in the following tables (in '000's):

	As of and for the period ended June 30, 2011				As of and for the period ended September 30, 2011
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	41,673	700	42,373		38,301	608	38,909
Total current liabilities	83,960	700	84,660		77,165	608	77,773
Other long term liabilities	7,089	708	7,797		4,363	725	5,088
Total liabilities	171,066	1,408	172,474		170,619	1,333	171,952
Retained earnings	162,857	(1,408)	161,449		171,524	(1,333)	170,191
Total equity	138,054	(1,408)	136,646		145,811	(1,333)	144,478
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	13,064	833	13,897		5,259	(75)	5,184
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net earnings attributable to Twin Disc	18,830	(833)	17,997		9,581	75	9,656
Basic earnings per share	1.66	(0.07)	1.59		0.84	0.01	0.85
Diluted earnings per share	1.64	(0.07)	1.57		0.83	0.01	0.84
Comprehensive income (loss)	49,743	(833)	48,910		7,834	75	7,909
Comprehensive income (loss) attributable to Twin Disc	49,608	(833)	48,775		7,780	75	7,855
Revised consolidated statement of cash flows amounts
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net change in working capital, excluding cash and debt, and other					(16,354)	(75)	(16,429)
Accrued liabilities	6,713	833	7,546
Other non-cash changes, net					2,950	(445)	2,505
Net cash used by operating activities					(1,196)	(445)	(1,641)
Excess tax benefits from stock comp					-	445	445
Net cash provided by financing activities					10,051	445	10,496
	As of and for the period ended December 30, 2011				As of and for the period ended March 30, 2012
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	38,056	608	38,664
Total current liabilities	77,872	608	78,480
Other long term liabilities	4,845	742	5,587		4,478	759	5,237
Total liabilities	170,822	1,350	172,172		168,130	759	168,889
Retained earnings	176,467	(1,350)	175,117		184,831	(759)	184,072
Total equity	145,586	(1,350)	144,236		157,231	(759)	156,472
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	8,627	(58)		8,569	14,039	(649)	13,390
Net earnings	15,501	58		15,559	24,939	649	25,588
Net earnings attributable to Twin Disc	15,438	58		15,496	24,831	649	25,480
Basic earnings per share	1.35	0.01		1.36	2.18	0.05	2.23
Diluted earnings per share	1.34	-		1.34	2.15	0.05	2.20
Comprehensive income (loss)	7,853	58		7,911	19,950	649	20,599
Comprehensive income (loss) attributable to Twin Disc	7,790	58		7,848	19,842	649	20,491
Quarter
Income taxes	3,368	17		3,385	5,412	(591)	4,821
Net earnings	5,866	(17)		5,849	9,438	591	10,029
Near earnings attributable to Twin Disc	5,857	(17)		5,840	9,393	591	9,984
Basic earnings per share	0.51	-		0.51	0.82	0.05	0.87
Diluted earnings per share	0.51	(0.01)		0.50	0.81	0.05	0.86
Comprehensive income (loss)	19	(17)		2	12,097	591	12,688
Comprehensive income (loss) attributable to Twin Disc	10	(17)		(7)	12,052	591	12,643
Revised consolidated statement of cash flows amounts
Net earnings	15,501	58		15,559	24,939	649	25,588
Net change in working capital, excluding cash and debt, and other	(28,157)	(58)		(28,215)	(41,315)	(649)	(41,964)
Accrued liabilities
Other non-cash changes, net	4,291	(535)		3,756
Net cash used by operating activities	(3,054)	(535)		(3,589)
Excess tax benefits from stock comp	-	535		535
Net cash provided by financing activities	10,096	535		10,631
	As of and for the period ended June 30, 2012				As of and for the period ended September 28, 2012
	Reported	Adjustment		Revised	Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Other long term liabilities	4,171	777		4,948	2,200	797	2,997
Total liabilities	166,546	777		167,323	160,512	797	161,309
Retained earnings	185,083	(777)		184,306	185,308	(797)	184,511
Total equity	137,286	(777)		136,509	139,587	(797)	138,790
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	18,446	(631)		17,815	1,077	20	1,097
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net earnings attributable to Twin Disc	26,112	631		26,743	1,251	(20)	1,231
Basic earnings per share	2.29	0.05		2.34	0.11	-	0.11
Diluted earnings per share	2.26	0.05		2.31	0.11	-	0.11
Comprehensive income (loss)	2,882	631		3,513	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	2,684	631		3,315	3,183	20	3,203
Quarter
Income taxes	4,407	18		4,425	1,077	20	1,097
Net earnings	1,371	(18)		1,353	1,286	(20)	1,266
Net earnings attributable to Twin Disc	1,281	(18)		1,263	1,251	(20)	1,231
Basic earnings per share	0.11	-		0.11	0.11	-	0.11
Diluted earnings per share	0.11	-		0.11	0.11	-	0.11
Comprehensive income (loss)	(17,068)	(18)		(17,086)	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	(17,158)	(18)		(17,176)	3,183	20	3,203
Revised consolidated statement of cash flows amounts
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net change in working capital, excluding cash and debt, and other					(4,059)	20	(4,039)
Accrued liabilities	(2,273)	(631)		(2,904)

New Accounting Releases

New Accounting Releases

In July 2012, the Financial Accounting Standards Board ("FASB") issued amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment. After an assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test. Otherwise, the quantitative test is optional. The amended guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of this guidance is not expected to have a material impact on the Company's financial results.

In September 2011, the FASB issued a standards update that is intended to simplify how entities test goodwill for impairment. This update permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350 "Intangibles-Goodwill and Other." This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (the Company's fiscal 2013). This standards update is not expected to have a material impact on the Company's financial statements.

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Net sales	$ 72,325	$ 82,941	$ 141,118	$ 164,271
Cost of goods sold	50,014	53,379	99,391	103,941
Gross profit	22,311	29,562	41,727	60,330
Marketing, engineering and administrative expenses	16,770	20,097	33,390	36,006
Earnings from operations	5,541	9,465	8,337	24,324
Interest expense	329	381	635	740
Other expense (income), net	(22)	(150)	105	(544)
Other income (expense) total	307	231	740	196
Earnings before income taxes and noncontrolling interest	5,234	9,234	7,597	24,128
Income taxes	1,815	3,385	2,912	8,569
Net earnings	3,419	5,849	4,685	15,559
Less: Net earnings attributable to noncontrolling interest, net of tax	(59)	(9)	(94)	(63)
Net earnings attributable to Twin Disc	3,360	5,840	4,591	15,496
Dividends per share (in dollars per share)	$ 0.09	$ 0.08	$ 0.18	$ 0.16
Earnings per share data:
Basic earnings per share attributable to Twin Disc common shareholders (in dollars per share)	$ 0.30	$ 0.51	$ 0.41	$ 1.36
Diluted earnings per share attributable to Twin Disc common shareholders (in dollars per share)	$ 0.29	$ 0.50	$ 0.40	$ 1.34
Weighted average shares outstanding data:
Basic shares outstanding (in shares)	11,366	11,429	11,368	11,411
Dilutive stock awards (in shares)	68	143	73	144
Diluted shares outstanding (in shares)	11,434	11,572	11,441	11,555
Net earnings	3,419	5,849	4,685	15,559
Other comprehensive income (loss), net:
Benefit plan adjustments, net of income taxes of $375, $236, $759 and $507, respectively	652	411	1,320	885
Foreign currency translation adjustment	2,130	(6,258)	3,394	(8,533)
Other comprehensive income (loss), net	2,782	(5,847)	4,714	(7,648)
Comprehensive income	6,201	2	9,399	7,911
Less: comprehensive income attributable to noncontrolling interest	(59)	(9)	(94)	(63)
Comprehensive income (loss) attributable to Twin Disc	$ 6,142	$ (7)	$ 9,305	$ 7,848

XML

Stock-Based Compensation

6 Months Ended

Dec. 28, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

F. Stock-Based Compensation

In the first half of fiscal 2013 and 2012, the Company granted a target number of 28,255 and 15,449 performance stock unit awards, respectively, to various employees of the Company, including executive officers. The performance stock unit awards granted in fiscal 2013 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Unit Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2015. The performance stock unit awards granted in fiscal 2013 are subject to adjustment if the Company's economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance stock units that can be awarded if the target objective is exceeded is 33,906. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock unit awards granted in fiscal 2013 and has reversed previously recognized expenses related to these awards. The performance stock unit awards granted in fiscal 2012 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Unit Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2014. The performance stock unit awards granted in fiscal 2012 are subject to adjustment if the Company's economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance stock units that can be awarded if the target objective is exceeded is 18,539. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock unit awards granted in fiscal 2012 and has reversed previously recognized expenses related to these awards. There were 161,734 and 243,647 unvested stock unit awards outstanding at December 28, 2012 and December 30, 2011, respectively. The performance stock unit awards are remeasured at fair-value based upon the Company's stock price at the end of each reporting period. The fair-value of the stock unit awards are expensed over the performance period for the shares that are expected to ultimately vest. The compensation (income) expense for the three and six months ended December 28, 2012, related to the performance stock unit awards, approximated $(58,000) and $120,000 respectively. The compensation expense for the three and six months ended December 30, 2011, related to the performance stock unit awards, approximated $2,016,000 and $1,051,000 respectively.

In the first half of fiscal 2013 and 2012, the Company granted a target number of 28,535 and 15,335 performance stock awards, respectively, to various employees of the Company, including executive officers. The performance stock awards granted in fiscal 2013 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2015. The performance stock awards granted in fiscal 2013 are subject to adjustment if the Company's economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 34,242. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock awards granted in fiscal 2013 and has reversed previously recognized expenses related to these awards. The performance stock awards granted in fiscal 2012 will vest if the Company achieves a specified target objective relating to consolidated economic profit (as defined in the Performance Stock Award Grant Agreement) in the cumulative three fiscal year period ending June 30, 2014. The performance stock awards granted in fiscal 2012 are subject to adjustment if the Company's economic profit for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 18,402. Based upon actual results to date and the low probability of achieving the threshold performance levels, the Company is not accruing the performance stock awards granted in fiscal 2012 and has reversed previously recognized expenses related to these awards. There were 130,926 and 191,398 unvested stock awards outstanding at December 28, 2012 and December 30, 2011, respectively. The fair value of the stock awards (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. The compensation (income) expense for the three and six months ended December 28, 2012, related to performance stock awards, approximated $(164,000) and $15,000, respectively. The compensation expense for the three and six months ended December 30, 2011, related to performance stock awards, approximated $214,000 and $411,000, respectively.

In addition to the performance shares mentioned above, the Company has unvested restricted stock outstanding that will vest if certain service conditions are fulfilled. The fair value of the restricted stock grants is recorded as compensation over the vesting period, which is generally 1 to 4 years. During the first half of fiscal 2013 and 2012, the Company granted 83,729 and 43,620 service-based restricted shares, respectively, to employees and non-employee directors. There were 220,343 and 250,323 unvested shares outstanding at December 28, 2012 and December 30, 2011, respectively. The compensation expense for the three and six months ended December 28, 2012, related to these service-based awards approximated $400,000 and $788,000, respectively. The compensation expense for the three and six months ended December 30, 2011, related to these service-based awards approximated $364,000 and $706,000, respectively.

XML

Business Segments

6 Months Ended

Dec. 28, 2012

Business Segments [Abstract]

Business Segments

E.     Business Segments

The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy duty off-highway power transmission equipment. Principal products include marine transmissions, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets.

The Company has two reportable segments: manufacturing and distribution. These segments are managed separately because each provides different services and requires different technology and marketing strategies. The accounting practices of the segments are the same as those described in the summary of significant accounting policies. Transfers among segments are at established inter-company selling prices. Management evaluates the performance of its segments based on net earnings.

Information about the Company's segments is summarized as follows (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Manufacturing segment sales	$66,914	$78,044	$125,196	$149,027
Distribution segment sales	33,742	29,082	64,745	63,177
Inter/Intra segment elimination - manufacturing	(23,522)	(22,280)	(39,080)	(41,949)
Inter/Intra segment elimination - distribution	(4,809)	(1,905)	(9,743)	(5,984)
Net sales	$72,325	$82,941	$141,118	$164,271
Manufacturing segment net earnings	$5,055	$8,259	$7,889	$16,978
Distribution segment net earnings	1,551	1,065	2,703	3,230
Corporate and eliminations	(3,246)	(3,484)	(6,001)	(4,712)
Net earnings attributable to Twin Disc	$3,360	$5,840	$4,591	$15,496
	Dec. 28,	June 30,
Assets	2012	2012
Manufacturing segment assets	$282,930	$272,098
Distribution segment assets	62,981	58,275
Corporate assets and elimination
of inter-company assets	(46,335)	(26,541)
	$299,576	$303,832

XML

Pension and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Dec. 28, 2012

Pension and Other Postretirement Benefit Plans [Abstract]

Components of Net Periodic Benefit Cost

The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to October 1, 2003 and certain foreign employees. Additionally, the Company provides health care and life insurance benefits for certain domestic retirees. Components of net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Pension Benefits:
Service cost	$49	$53	$93	$99
Interest cost	1,311	1,517	2,619	3,027
Expected return on plan assets	(1,580)	(1,928)	(3,151)	(3,847)
Amortization of net loss	835	580	1,669	1,160
Net periodic benefit cost	$615	$222	$1,230	$439
Postretirement Benefits:
Service cost	$9	$10	$17	$21
Interest cost	191	247	383	493
Amortization of net actuarial loss	197	105	395	210
Net periodic benefit cost	$397	$362	$795	$724

XML

Basis of Presentation (Tables)

6 Months Ended

Dec. 28, 2012

Basis of Presentation [Abstract]

Impact of Revisions on the Condensed Consolidated Statements of Cash Flows

The impacts of these revisions are shown in the following tables (in '000's):

	As of and for the period ended June 30, 2011				As of and for the period ended September 30, 2011
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	41,673	700	42,373		38,301	608	38,909
Total current liabilities	83,960	700	84,660		77,165	608	77,773
Other long term liabilities	7,089	708	7,797		4,363	725	5,088
Total liabilities	171,066	1,408	172,474		170,619	1,333	171,952
Retained earnings	162,857	(1,408)	161,449		171,524	(1,333)	170,191
Total equity	138,054	(1,408)	136,646		145,811	(1,333)	144,478
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	13,064	833	13,897		5,259	(75)	5,184
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net earnings attributable to Twin Disc	18,830	(833)	17,997		9,581	75	9,656
Basic earnings per share	1.66	(0.07)	1.59		0.84	0.01	0.85
Diluted earnings per share	1.64	(0.07)	1.57		0.83	0.01	0.84
Comprehensive income (loss)	49,743	(833)	48,910		7,834	75	7,909
Comprehensive income (loss) attributable to Twin Disc	49,608	(833)	48,775		7,780	75	7,855
Revised consolidated statement of cash flows amounts
Net earnings	18,965	(833)	18,132		9,635	75	9,710
Net change in working capital, excluding cash and debt, and other					(16,354)	(75)	(16,429)
Accrued liabilities	6,713	833	7,546
Other non-cash changes, net					2,950	(445)	2,505
Net cash used by operating activities					(1,196)	(445)	(1,641)
Excess tax benefits from stock comp					-	445	445
Net cash provided by financing activities					10,051	445	10,496
	As of and for the period ended December 30, 2011				As of and for the period ended March 30, 2012
	Reported	Adjustment	Revised		Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Accrued liabilities	38,056	608	38,664
Total current liabilities	77,872	608	78,480
Other long term liabilities	4,845	742	5,587		4,478	759	5,237
Total liabilities	170,822	1,350	172,172		168,130	759	168,889
Retained earnings	176,467	(1,350)	175,117		184,831	(759)	184,072
Total equity	145,586	(1,350)	144,236		157,231	(759)	156,472
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	8,627	(58)		8,569	14,039	(649)	13,390
Net earnings	15,501	58		15,559	24,939	649	25,588
Net earnings attributable to Twin Disc	15,438	58		15,496	24,831	649	25,480
Basic earnings per share	1.35	0.01		1.36	2.18	0.05	2.23
Diluted earnings per share	1.34	-		1.34	2.15	0.05	2.20
Comprehensive income (loss)	7,853	58		7,911	19,950	649	20,599
Comprehensive income (loss) attributable to Twin Disc	7,790	58		7,848	19,842	649	20,491
Quarter
Income taxes	3,368	17		3,385	5,412	(591)	4,821
Net earnings	5,866	(17)		5,849	9,438	591	10,029
Near earnings attributable to Twin Disc	5,857	(17)		5,840	9,393	591	9,984
Basic earnings per share	0.51	-		0.51	0.82	0.05	0.87
Diluted earnings per share	0.51	(0.01)		0.50	0.81	0.05	0.86
Comprehensive income (loss)	19	(17)		2	12,097	591	12,688
Comprehensive income (loss) attributable to Twin Disc	10	(17)		(7)	12,052	591	12,643
Revised consolidated statement of cash flows amounts
Net earnings	15,501	58		15,559	24,939	649	25,588
Net change in working capital, excluding cash and debt, and other	(28,157)	(58)		(28,215)	(41,315)	(649)	(41,964)
Accrued liabilities
Other non-cash changes, net	4,291	(535)		3,756
Net cash used by operating activities	(3,054)	(535)		(3,589)
Excess tax benefits from stock comp	-	535		535
Net cash provided by financing activities	10,096	535		10,631
	As of and for the period ended June 30, 2012				As of and for the period ended September 28, 2012
	Reported	Adjustment		Revised	Reported	Adjustment	Revised
Revised consolidated balance sheet amounts
Other long term liabilities	4,171	777		4,948	2,200	797	2,997
Total liabilities	166,546	777		167,323	160,512	797	161,309
Retained earnings	185,083	(777)		184,306	185,308	(797)	184,511
Total equity	137,286	(777)		136,509	139,587	(797)	138,790
Revised consolidated statement of comprehensive income (loss) amounts
Year to date
Income taxes	18,446	(631)		17,815	1,077	20	1,097
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net earnings attributable to Twin Disc	26,112	631		26,743	1,251	(20)	1,231
Basic earnings per share	2.29	0.05		2.34	0.11	-	0.11
Diluted earnings per share	2.26	0.05		2.31	0.11	-	0.11
Comprehensive income (loss)	2,882	631		3,513	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	2,684	631		3,315	3,183	20	3,203
Quarter
Income taxes	4,407	18		4,425	1,077	20	1,097
Net earnings	1,371	(18)		1,353	1,286	(20)	1,266
Net earnings attributable to Twin Disc	1,281	(18)		1,263	1,251	(20)	1,231
Basic earnings per share	0.11	-		0.11	0.11	-	0.11
Diluted earnings per share	0.11	-		0.11	0.11	-	0.11
Comprehensive income (loss)	(17,068)	(18)		(17,086)	3,218	20	3,238
Comprehensive income (loss) attributable to Twin Disc	(17,158)	(18)		(17,176)	3,183	20	3,203
Revised consolidated statement of cash flows amounts
Net earnings	26,310	631		26,941	1,286	(20)	1,266
Net change in working capital, excluding cash and debt, and other					(4,059)	20	(4,039)
Accrued liabilities	(2,273)	(631)		(2,904)

XML

Goodwill and Other Intangibles

6 Months Ended

Dec. 28, 2012

Goodwill and Other Intangibles [Abstract]

Goodwill and Other Intangibles

I.      Goodwill and Other Intangibles

The changes in the carrying amount of goodwill, all of which is allocated to the manufacturing segment, for the six months ended December 28, 2012 were as follows (in thousands):

Gross balance at June 30, 2012	$16,786
Accumulated impairment losses	(3,670)
Net balance at June 30, 2012	$13,116
Gross balance at June 30, 2012	$16,786
Translation adjustment	151
Gross balance at December 28, 2012	16,937
Accumulated impairment losses	(3,670)
Net balance at December 28, 2012	$13,267

The gross carrying amount and accumulated amortization of the Company's intangible assets that have defined useful lives and are subject to amortization as of December 28, 2012 and June 30, 2012 were as follows (in thousands):

	December 28,	June 30,
	2012	2012
Intangible assets with finite lives:
Licensing agreements	$3,015	$3,015
Non-compete agreements	2,050	2,050
Other	5,991	5,991
	11,056	11,056
Accumulated amortization	(8,937)	(8,583)
Foreign currency translation	545	469
Total	$2,664	$2,942

The weighted average remaining useful life of the intangible assets included in the table above is approximately 6 years.

Intangible amortization expense was $166,000 and $354,000 for the three and six months ended December 28, 2012, respectively, and $201,000 and $417,000 for the three and six months ended December 30, 2011, respectively. Estimated intangible amortization expense for the remainder of fiscal 2013 and each of the next five fiscal years is as follows (in thousands):

Fiscal Year
2013	$376
2014	722
2015	420
2016	280
2017	276
2018	276

The gross carrying amount of the Company's intangible assets that have indefinite lives and are not subject to amortization as of December 28, 2012 and June 30, 2012 are $2,130,000 and $2,054,000, respectively. These assets are comprised of acquired tradenames.

XML

Pension and Other Postretirement Benefit Plans

6 Months Ended

Dec. 28, 2012

Pension and Other Postretirement Benefit Plans [Abstract]

Pension and Other Postretirement Benefit Plans

G.      Pension and Other Postretirement Benefit Plans

The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to October 1, 2003 and certain foreign employees. Additionally, the Company provides health care and life insurance benefits for certain domestic retirees. Components of net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Pension Benefits:
Service cost	$49	$53	$93	$99
Interest cost	1,311	1,517	2,619	3,027
Expected return on plan assets	(1,580)	(1,928)	(3,151)	(3,847)
Amortization of net loss	835	580	1,669	1,160
Net periodic benefit cost	$615	$222	$1,230	$439
Postretirement Benefits:
Service cost	$9	$10	$17	$21
Interest cost	191	247	383	493
Amortization of net actuarial loss	197	105	395	210
Net periodic benefit cost	$397	$362	$795	$724

The Company expects to contribute approximately $4,352,000 to its pension plans in fiscal 2013. As of December 28, 2012, $3,562,000 in contributions have been made.

XML

Income Taxes

6 Months Ended

Dec. 28, 2012

Income Taxes [Abstract]

Income Taxes

H. Income Taxes

For the six months ended December 28, 2012 and December 30, 2011, the Company's effective income tax rate was 38.3% and 35.5% respectively. The fiscal 2013 rate reflects the impact of the valuation allowance on a continued reduced earnings base, increased net foreign earnings and additional reserves for uncertain tax positions ($380,000). Decreased domestic sales were offset by a limited Section 199 deduction. No research and development tax credit was reflected as it was not extended within the quarter. The favorable impact of the recently extended research and development tax credit will be recorded in the third fiscal quarter, as it was signed January 2, 2013.

Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter. The impact of the Company's operations in certain foreign jurisdictions is removed from the overall effective tax rate methodology and recorded directly based upon year-to-date results as these operations anticipate net operating losses for the year for which no tax benefit can be recognized.

The Company has approximately $1,500,000 of unrecognized tax benefits, including related interest and penalties, after the revision discussed in footnote A as of December 28, 2012, which, if recognized, would favorably impact the effective tax rate. The Company finalized an audit settlement in the U.S. for fiscal years 2010 and 2011 which resulted in a decrease in unrecognized tax benefits of $305,000. Additionally, as a result of an on-going state audit, the Company added an additional reserve of $380,000.

Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are 2008 through 2011 for the major operations in Italy, Belgium, and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal 2011. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2001 through 2009. During this quarter the Company was notified by the state of Florida of a tax examination covering open periods. It is reasonably possible that at least one of these audit cycles will be completed during fiscal 2013.

XML

Long-term Debt

6 Months Ended

Dec. 28, 2012

Long-term Debt [Abstract]

Long-term Debt

J. Long-term Debt

Long-term debt at December 28, 2012 and June 30, 2012 consisted of the following (in thousands):

	December 28,	June 30,
	2012	2012
Revolving loan	$19,500	$17,550
10-year unsecured senior notes	14,286	14,286
Other	208	309
Subtotal	33,994	32,145
Less: current maturities and short-term borrowings	(3,697)	(3,744)
Total long-term debt	$30,297	$28,401

The revolving loan and unsecured senior notes listed above are subject to certain covenants, including restrictions on investments, acquisitions and indebtedness. Financial covenants, as defined, include a minimum consolidated net worth, a minimum EBITDA for the most recent four fiscal quarters, and a maximum total funded debt to EBITDA ratio. As of December 28, 2012, the Company was in compliance with these covenants.

The fair value of long-term debt is estimated by discounting the future cash flows at rates offered to the Company for similar debt instruments of comparable maturities. This rate was represented by the US Treasury Three-Year Yield Curve Rate (0.36% and 0.41% for December 28, 2012 and June 30, 2012, respectively), plus the current add-on related to the revolving loan agreement (1.50% for December 28, 2012 and June 30, 2012). The fair value of the Company's 10-year unsecured senior notes due April 10, 2016 was approximately $15,499,000 and $15,768,000 at December 28, 2012 and June 30, 2012, respectively. The Company's revolving loan agreement approximates fair value at December 28, 2012 and June 30, 2012. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.

XML

Goodwill and Other Intangibles (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011	Jun. 30, 2012
Goodwill [Roll Forward]
Gross beginning balance			$ 16,786,000
Accumulated impairment losses			(3,670,000)
Net beginning balance			13,116,000
Translation adjustment			151,000
Gross ending balance	16,937,000		16,937,000
Accumulated impairment losses	(3,670,000)		(3,670,000)
Net ending balance	13,267,000		13,267,000
Intangible assets with finite lives [Abstract]
Licensing agreements	3,015,000		3,015,000		3,015,000
Non-compete agreements	2,050,000		2,050,000		2,050,000
Other	5,991,000		5,991,000		5,991,000
Intangible assets, gross	11,056,000		11,056,000		11,056,000
Accumulated amortization	(8,937,000)		(8,937,000)		(8,583,000)
Foreign currency translation	545,000		545,000		469,000
Total	2,664,000		2,664,000		2,942,000
Weighted average remaining useful life			6 years
Intangible amortization expense	166,000	201,000	354,000	417,000
Estimated intangible amortization expense [Abstract]
2013	376,000		376,000
2014	722,000		722,000
2015	420,000		420,000
2016	280,000		280,000
2017	276,000		276,000
2018	276,000		276,000
Carrying amount of indefinite lived intangible assets, gross	$ 2,130,000		$ 2,130,000		$ 2,054,000

XML

Warranty (Tables)

6 Months Ended

Dec. 28, 2012

Warranty [Abstract]

Warranty Reserve

The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers. However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation. The warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends. While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires. The following is a listing of the activity in the warranty reserve during the three and six month periods ended December 28, 2012 and December 30, 2011 (in thousands):

	Three Months Ended		Six Months Ended
	Dec. 28,	Dec. 30,	Dec. 28,	Dec. 30,
	2012	2011	2012	2011
Reserve balance, beginning of period	$5,462	$6,583	$5,745	$6,022
Current period expense	1,086	317	1,967	1,781
Payments or credits to customers	(1,066)	(906)	(2,251)	(1,679)
Foreign currency translation	51	(111)	72	(241)
Reserve balance, end of period	$5,533	$5,883	$5,533	$5,883

XML

Shareholders' Equity (Tables)

6 Months Ended

Dec. 28, 2012

Shareholders' Equity [Abstract]

Reconciliation of Equity Balances

The following is a reconciliation of the Company's equity balances for the first fiscal six months of 2012 and 2013 (in thousands):
	Twin Disc, Inc. Shareholders' Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance –June 30, 2011	$10,863	$161,449	($11,383)	($25,252)	$969	$136,646
Net income		15,496			63	15,559
Translation adjustments			(8,590)		57	(8,533)
Benefit plan adjustments, net of tax			885			885
Cash dividends		(1,828)			(130)	(1,958)
Compensation expense and
windfall tax benefits	1,653					1,653
Shares (acquired) issued, net	(912)			896		(16)
Balance-December 30, 2011	$11,604	$175,117	($19,088)	($24,356)	$959	$144,236
	Twin Disc, Inc. Shareholders' Equity
			Accumulated
			Other		Non-
	Common	Retained	Comprehensive	Treasury	Controlling	Total
	Stock	Earnings	Income (Loss)	Stock	Interest	Equity
Balance-June 30, 2012	$12,759	$184,306	($34,797)	($26,781)	$1,022	$136,509
Net income		4,591			94	4,685
Translation adjustments			3,334		60	3,394
Benefit plan adjustments, net of tax			1,320			1,320
Cash dividends		(2,055)			(204)	(2,259)
Compensation expense and
windfall tax benefits	2,079					2,079
Shares (acquired) issued, net	(2,937)			(1,642)		(4,579)
Balance-December 28, 2012	$11,901	$186,842	($30,143)	($28,423)	$972	$141,149

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011
Other comprehensive income (loss), net:
Benefit plan adjustments, tax	$ 375	$ 236	$ 759	$ 507

XML

Contingencies

6 Months Ended

Dec. 28, 2012

Contingencies [Abstract]

Contingencies

D. Contingencies

The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, is not presently determinable.  Management believes that final disposition of such litigation will not have a material impact on the Company's results of operations, financial position or cash flows.

XML

Basis of Presentation (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended			3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended		3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended		3 Months Ended					6 Months Ended	9 Months Ended	12 Months Ended
	Dec. 28, 2012	Dec. 30, 2011	Dec. 28, 2012	Dec. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2010	Sep. 28, 2012 As Reported [Member]	Jun. 30, 2012 As Reported [Member]	Mar. 30, 2012 As Reported [Member]	Dec. 30, 2011 As Reported [Member]	Sep. 30, 2011 As Reported [Member]	Dec. 30, 2011 As Reported [Member]	Mar. 30, 2012 As Reported [Member]	Jun. 30, 2012 As Reported [Member]	Jun. 30, 2011 As Reported [Member]	Sep. 28, 2012 Adjustment [Member]	Jun. 30, 2012 Adjustment [Member]	Mar. 30, 2012 Adjustment [Member]	Dec. 30, 2011 Adjustment [Member]	Sep. 30, 2011 Adjustment [Member]	Dec. 30, 2011 Adjustment [Member]	Mar. 30, 2012 Adjustment [Member]	Jun. 30, 2012 Adjustment [Member]	Jun. 30, 2011 Adjustment [Member]	Sep. 28, 2012 As Revised [Member]	Jun. 30, 2012 As Revised [Member]	Mar. 30, 2012 As Revised [Member]	Dec. 30, 2011 As Revised [Member]	Sep. 30, 2011 As Revised [Member]	Dec. 30, 2011 As Revised [Member]	Mar. 30, 2012 As Revised [Member]	Jun. 30, 2012 As Revised [Member]	Jun. 30, 2011 As Revised [Member]
Revision of Prior Period Financial Statements [Abstract]
change in earnings attributable to change in uncertain tax positions					$ 69,000	$ 50,000	$ 104,000
Change in shareholders equity attributable to adjustment					700,000	(783,000)	83,000
Cumulative effect of adjustments						658,000	83,000
Excess tax benefit recorded in operating activities		90,000
Revised consolidated balance sheet amounts [Abstract]
Accrued liabilities	32,736,000		32,736,000		39,331,000						38,056,000	38,301,000	38,056,000			41,673,000				608,000	608,000	608,000			700,000				38,664,000	38,909,000	38,664,000			42,373,000
Total current liabilities	60,800,000		60,800,000		66,625,000						77,872,000	77,165,000	77,872,000			83,960,000				608,000	608,000	608,000			700,000				78,480,000	77,773,000	78,480,000			84,660,000
Other long term liabilities	3,291,000		3,291,000		4,948,000			2,200,000	4,171,000	4,478,000	4,845,000	4,363,000	4,845,000	4,478,000	4,171,000	7,089,000	797,000	777,000	759,000	742,000	725,000	742,000	759,000	777,000	708,000	2,997,000	4,948,000	5,237,000	5,587,000	5,088,000	5,587,000	5,237,000	4,948,000	7,797,000
Total liabilities	158,427,000		158,427,000		167,323,000			160,512,000	166,546,000	168,130,000	170,822,000	170,619,000	170,822,000	168,130,000	166,546,000	171,066,000	797,000	777,000	759,000	1,350,000	1,333,000	1,350,000	759,000	777,000	1,408,000	161,309,000	167,323,000	168,889,000	172,172,000	171,952,000	172,172,000	168,889,000	167,323,000	172,474,000
Retained earnings	186,842,000		186,842,000		184,306,000			185,308,000	185,083,000	184,831,000	176,467,000	171,524,000	176,467,000	184,831,000	185,083,000	162,857,000	(797,000)	(777,000)	(759,000)	(1,350,000)	(1,333,000)	(1,350,000)	(759,000)	(777,000)	(1,408,000)	184,511,000	184,306,000	184,072,000	175,117,000	170,191,000	175,117,000	184,072,000	184,306,000	161,449,000
Total equity	141,149,000	144,236,000	141,149,000	144,236,000	136,509,000	136,646,000		139,587,000	137,286,000	157,231,000	145,586,000	145,811,000	145,586,000	157,231,000	137,286,000	138,054,000	(797,000)	(777,000)	(759,000)	(1,350,000)	(1,333,000)	(1,350,000)	(759,000)	(777,000)	(1,408,000)	138,790,000	136,509,000	156,472,000	144,236,000	144,478,000	144,236,000	156,472,000	136,509,000	136,646,000
Revised consolidated statement of operations and comprehensive income (loss) amounts [Abstract]
Income taxes	1,815,000	3,385,000	2,912,000	8,569,000				1,077,000	4,407,000	5,412,000	3,368,000	5,259,000	8,627,000	14,039,000	18,446,000	13,064,000	20,000	18,000	(591,000)	17,000	(75,000)	(58,000)	(649,000)	(631,000)	833,000	1,097,000	4,425,000	4,821,000	3,385,000	5,184,000	8,569,000	13,390,000	17,815,000	13,897,000
Net earnings	3,419,000	5,849,000	4,685,000	15,559,000				1,286,000	1,371,000	9,438,000	5,866,000	9,635,000	15,501,000	24,939,000	26,310,000	18,965,000	(20,000)	(18,000)	591,000	(17,000)	75,000	58,000	649,000	631,000	(833,000)	1,266,000	1,353,000	10,029,000	5,849,000	9,710,000	15,559,000	25,588,000	26,941,000	18,132,000
Near earnings attributable to Twin Disc	3,360,000	5,840,000	4,591,000	15,496,000				1,251,000	1,281,000	9,393,000	5,857,000	9,581,000	15,438,000	24,831,000	26,112,000	18,830,000	(20,000)	(18,000)	591,000	(17,000)	75,000	58,000	649,000	631,000	(833,000)	1,231,000	1,263,000	9,984,000	5,840,000	9,656,000	15,496,000	25,480,000	26,743,000	17,997,000
Basic earnings per share (in dollars per share)	$ 0.30	$ 0.51	$ 0.41	$ 1.36				$ 0.11	$ 0.11	$ 0.82	$ 0.51	$ 0.84	$ 1.35	$ 2.18	$ 2.29	$ 1.66	$ 0	$ 0	$ 0.05	$ 0	$ 0.01	$ 0.01	$ 0.05	$ 0.05	$ (0.07)	$ 0.11	$ 0.11	$ 0.87	$ 0.51	$ 0.85	$ 1.36	$ 2.23	$ 2.34	$ 1.59
Diluted earnings per share (in dollars per share)	$ 0.29	$ 0.50	$ 0.40	$ 1.34				$ 0.11	$ 0.11	$ 0.81	$ 0.51	$ 0.83	$ 1.34	$ 2.15	$ 2.26	$ 1.64	$ 0	$ 0	$ 0.05	$ (0.01)	$ 0.01	$ 0	$ 0.05	$ 0.05	$ (0.07)	$ 0.11	$ 0.11	$ 0.86	$ 0.50	$ 0.84	$ 1.34	$ 2.20	$ 2.31	$ 1.57
Comprehensive income (loss)	6,201,000	2,000	9,399,000	7,911,000				3,218,000	(17,068,000)	12,097,000	19,000	7,834,000	7,853,000	19,950,000	2,882,000	49,743,000	20,000	(18,000)	591,000	(17,000)	75,000	58,000	649,000	631,000	(833,000)	3,238,000	(17,086,000)	12,688,000	2,000	7,909,000	7,911,000	20,599,000	3,513,000	48,910,000
Comprehensive income (loss) attributable to Twin Disc	6,142,000	(7,000)	9,305,000	7,848,000				3,183,000	(17,158,000)	12,052,000	10,000	7,780,000	7,790,000	19,842,000	2,684,000	49,608,000	20,000	(18,000)	591,000	(17,000)	75,000	58,000	649,000	631,000	(833,000)	3,203,000	(17,176,000)	12,643,000	(7,000)	7,855,000	7,848,000	20,491,000	3,315,000	48,775,000
Revised consolidated statement of cash flows amounts [Abstract]
Net earnings	3,419,000	5,849,000	4,685,000	15,559,000				1,286,000	1,371,000	9,438,000	5,866,000	9,635,000	15,501,000	24,939,000	26,310,000	18,965,000	(20,000)	(18,000)	591,000	(17,000)	75,000	58,000	649,000	631,000	(833,000)	1,266,000	1,353,000	10,029,000	5,849,000	9,710,000	15,559,000	25,588,000	26,941,000	18,132,000
Net change in working capital, excluding cash and debt, and other			(463,000)	28,215,000				(4,059,000)				(16,354,000)	(28,157,000)	(41,315,000)			20,000				(75,000)	(58,000)	(649,000)			(4,039,000)				(16,429,000)	(28,215,000)	(41,964,000)
Accrued liabilities															(2,273,000)	6,713,000								(631,000)	833,000								(2,904,000)	7,546,000
Cash flows from operating activities: [Abstract]
Other non-cash changes, net			(1,599,000)	(3,756,000)								2,950,000	4,291,000								(445,000)	(535,000)								2,505,000	3,756,000
Net cash used by operating activities			12,092,000	(3,589,000)								(1,196,000)	(3,054,000)								(445,000)	(535,000)								(1,641,000)	(3,589,000)
Cash flows from financing activities: [Abstract]
Excess tax benefits from stock compensation			1,276,000	535,000								0	0								445,000	535,000								445,000	535,000
Net cash provided by financing activities			$ (3,722,000)	$ 10,631,000								$ 10,051,000	$ 10,096,000								$ 445,000	$ 535,000								$ 10,496,000	$ 10,631,000

XML

Inventory (Tables)

6 Months Ended

Dec. 28, 2012

Inventory [Abstract]

Major Classes of Inventories

The major classes of inventories were as follows (in thousands):

	December 28,		June 30,
	2012		2012
Inventories:
Finished parts	$	78,710	$	62,909
Work in process		13,983		16,608
Raw materials		25,605		23,661
	$	118,298	$	103,178